Contents

Editorial Policy● Boosting Understanding of the Sanki Engineering GroupWe have positioned the SANKI REPORT, the annual report of Sanki Engineering,04

43

Introduction
04
06 History of Sanki Engineering
10 Business Overview by Segment
14 Financial and Non-Financial Highlights
Management Philosophy

16
20

Message from the President
Sanki Engineering’s Future Vision
and Value Creation

29 Message from the Chief Financial Officer

32 Feature 2:

S anki Engineering Group’s
Initiatives for Realizing Carbon
Neutrality

90

Systems that Provide Solutions
for the Logistics Industry

SANKI REPORT 2022

48 Environment• A feature section focusing on concrete measures for value creation by theSocialSocial• Our response to opportunities and risks related to upstream and downstream

Quality Control
Occupational Health and Safety

activities and future direction, and we welcome feedback for enhancing ouroperations and information disclosure. Key content included in the 2022 report• “Sanki Engineering Group Materiality” to guide the Sanki Engineering Group’s
sustainability management (pages 24 and 25)
Group’s financial and capital policies (page 29)
Sanki Engineering Group (pages 30 to 33)
areas in the “Sanki Engineering Group Value Chain” section (pages 44 and 45)
Major information that was added to our disclosure includes the following.
• Information disclosure on risks and opportunities associated with climatechange (pages 49 and 50)

Supply Chain• Volume of GHG emissions (Scope 1,2 and 3) and reduction target (page 51)

Human Resources● Reference Guidelines

Local Communities◦“International IR Framework” of the IFRS Foundation

Corporate GovernanceCompliance◦Ministry of Economy, Trade and Industry’s “Guidance for Integrated Corporate
Disclosure and Company-Investor Dialogues for Collaborative Value Creation”◦GRI Sustainability Reporting Standards 2016, 2018, 2019, 2020, and 2021
◦Ministry of the Environment’s “Environmental Reporting Guidelines 2018”◦ISO26000

Risk Management● Organizations Covered by the Report

Human Rights
Dialogue with Shareholders andInvestors

The Sanki Engineering Group, which consists of Sanki Engineering Co., Ltd. andits eight subsidiaries.
◦Non-financial information is based on non-consolidated figures for
Sanki Engineering Co., Ltd. When the information concerns the Group,Financial Report andCorporate Information● Reporting Period

90 Financial Report
98 Corporate Information,● Publication Date

Business Locations, and Group
Companies
100 Share Information

33 Feature 3: D eveloping Sorting Devices and02

Environment
Environment• “Message from the Chief Financial Officer” explaining the Sanki Engineering

hope it will boost understanding of the Sanki Engineering Group’s businessorganizations covered by the data are specified in the text, list, or graph.

S upporting the Semiconductor
Industry with Sanki Engineering
Clean Rooms

34 Facilities Construction Business
38 Plants & Machinery Systems Business
42 Real Estate Businessis listed below.

74
82
85
88
89

Medium-Term Management Plan“Century 2025” Phase 3 (FY2022–2025)

30 Feature 1:

43 Sustainability Management
44 Sanki Engineering Group Value Chain

Governance
Governance rowth Strategies andG
Sustainability Management26

as a key, integrated communication tool for reaching all our stakeholders. We

57
61
63
66
72

20 Promoting Sustainability Management
22 Our Value Creation Process
24 Sanki Engineering Group Materiality

26

Foundation of Sustainability
Management

101

Third-Party Opinion

April 2021–March 2022 (Some information from outside this period has also
been included.)

September 2022 (previous issue: September 2021; scheduled release of next
issue: September 2023)

Precaution on Performance Outlooks
In addition to past and present information
concerning the Sanki Engineering Group, thisreport includes the targets, plans, outlooks,
strategies, forecasts of future performance, andother information drawn from our long-term vision“Century 2025,” Medium-Term Management Plan“Century 2025” Phase 3 (FY2022–2025) as well asother sources. Please be aware that these forecasts
are the best estimates by Sanki Engineering
management and based on information available
at the time and that actual performance may differ
significantly from these forecasts, owing to changes
such as in economic conditions, market trends, andexchange rates.

SANKI REPORT 2022

03

Introduction

Sanki EngineeringGroup Philosophy
The Sanki Engineering Group Management Philosophy,
the Sanki Standard, is a comprehensive statement of
the Sanki Engineering Group’s purpose in society andpresents three values. The Sanki Engineering Group ispursuing sustained growth by ensuring all Group executive
officers and employees uphold these shared values and iscontributing to the creation of a sustainable society. Under
the Sanki Engineering Group Compliance Declaration, whichsummarizes 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 byperforming their daily job duties in accordance with the SankiEngineering Group Code of Conduct, which lays out the basic
principles of appropriate conduct, and the more specific SankiEngineering Group Action Guidelines.

Sanki Engineering GroupManagement Philosophy
Sanki Standard
We create comfortable environments through engineering
and widely contribute to social development.
We will refine our skills and wisdom with the aim ofincreasing client satisfaction.
We will place significance on communication andmutual respect.
We will remain aware that we are a member of society
and will act accordingly.

04

SANKI REPORT 202205

Introduction

History of Sanki Engineering

1950s

Sanki Engineering has developed its business in step with themodernization of Japanese industry over the past nine decades.
Under the Sanki Engineering Group Management Philosophy, “Wecreate comfortable environments through engineering and widely
contribute to social development,” the Company will continue to leadthe way toward a new age, with the power of technology, and towardits 100th anniversary in 2025.

Origin of
Our Corporate
Name

A Proactive Approachto TechnologicalInnovation

1960s

A Manufacturer that
Responds to the Needsof the Times

Sanki Engineering has its origins in the former Machinery
Division of Mitsui & Co. and was named by taking one
Chinese character each from “Mitsui” and “Machinery.”

1970s

World Events

Moves the head office to Hibiya

1935

Sanki Engineering is established
Capital of 500,000 yen and 12 employees

1920

1930

April 22, 1925

◦ 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◦ Provides HVAC equipment for satellite
communication ground stations in the Middle Eastand other regions and builds automotive testing
equipment in Russia

1963

Capital exceeds 1 billion yen

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

1940

1950

1960

1945 End of World War II

1958

1958

Opening of Tokyo Tower

1964

Tokyo Olympics

1971
Sets up the Environmental
Administration office

1973
Spins off the sash business

1970

1980

1970

1925

Laying the Basefor TechnologicalCompetence by Meeting
the Needs of the Era

1930s

Diversified and Expanded
Businesses Lead toGreater TechnologicalCompetence

1940s

Sanki’s Advanced
Technology Bolsters aConstruction Boom

SANKI REPORT 2022

◦ Begins businesses including heating, plumbing, and building materials,
and handles construction work for two major construction projects: theShiga manufacturing plant of Toyo Rayon (currently Toray Industries, Inc.)and the refrigerated warehouse of Aomori Seihyo Co., Ltd.
◦ Installs Japan’s first centralized air conditioning system for an entire
structure at Mitsui’s main building◦ L aunches the electrical systems business◦ Develops and installs a proprietary incinerator for facilities in the
Sanshin Building◦ Establishes Toyo Carrier Industries together with U.S.-based Carrier
Engineering and launches the air conditioning business◦ Completes work on the Tokyo Office of Nippon Life Insurance
Company (currently Takashimaya Nihonbashi department store)◦ Starts manufacturing conveyors◦ Concludes sales contracts for machinery used in mining-related
chemistry with 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

1980s

Rising to the Challengeof New Businesses

1990s

Driving Progress inEnvironmental andInformation Technologies

2000s

Meeting the Needs ofa Rapidly Advancing
Information SocietyJ apan World
Exposition, Osaka
Reversion of Okinawa

2000

1982
Builds the TechnicalResearch Laboratory

1972

From

06

The Japanese economy takes a favorable
turn, and the expansion in demand forbuilding construction and equipment
results in a dramatic improvement in the
Company’s business performance, lists
shares on the Tokyo Stock Exchange

1931
Celebrates the tenth anniversary of its
founding, with five branches, six field
offices, three affiliates, and around 300
employees

1923 Great Tokyo Earthquake◦ Completes work on HVAC, plumbing andelectrical systems for Japan’s first skyscraper, theKasumigaseki Building◦ Develops the standardized “6S sash” and gains the
top market share among steel sash manufacturers◦ Completes work on HVAC and plumbing for the
Yoyogi National Stadium

1950

Established in

History of SankiEngineering

Wide Range ofTechnologicalInnovations◦ Completes work on Japan’s first all-fluorescentlighting system in the Taisho Marine and Fire
Insurance Building◦ Becomes involved in night-soil treatment plantdisposal facilities in response to urban hygieneneeds◦ Delivers a roller conveyor to the Japanese Antarctic
Research Expedition II

Opens the Shonan Training Center

2005

Moves the head office to Nihonbashi

1990

1986

1991

Japan’s Equal Employment
Opportunity Law

1995
1997

2000
C
 ollapse of Japan’s bubble
economyGreat Hanshin Earthquake
Adoption of the Kyoto Protocol

2008  Lehman Brothers bankruptcy◦ Launches the information and communications business◦ Launches the facility systems business to deal with office integration and moving◦ Established a Group company to handle operations and management, as well as
repair and maintenance of Sanki facilities◦ Develops environment-related technology, including an ice thermal storage
system, sewage advanced treatment systems, and gasification and melting
furnaces◦ Develops technologies related to clean rooms for pharmaceutical andsemiconductor manufacturing plants◦ Advances network systems, including LAN, building monitoring andautomated control◦ Provides HVAC, 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

SANKI REPORT 2022072010sContributing to a
Sustainable Society
by Bolstering the LCE
Business2022◦ Promotes the LCE Business, which is intended to sustain thelife cycle of buildings and facilities, from planning, design andconstruction work to maintenance, operation/management,
renovation, and reconstruction◦ Wins order for the DBO project, a bulk contract encompassing
design, construction, management, and maintenance◦ Completes hygiene facility for the Tokyo Midtown Hibiya
building◦ Completes the HVAC, central monitoring, and automatedcontrol systems for the Toranomon Hills Business Tower◦ Completes HVAC, plumbing, and electrical systems for Yoyogi
National Stadium 1st Gymnasium

Sustainability Policies
Aiming to realize a strong business base and a sustainable
society by “creating comfortable environments throughengineering and widely contributing to social development”

P.2 0

READ MORE

Sanki’s Carbon Neutral
Declaration

CO2

The Sanki Engineering Group is making serious efforts toaddress the climate change crisis facing the world andaims to achieve carbon neutrality for the Group’s own GHG
emissions (Scope 1 and 2) by 2030 and for GHG emissions
including the supply chain (Scope 1, 2, and 3) by 2050.

P.2 5World Events

History of SankiEngineering

READ MORE

2025
Toward the 100th Anniversary

2011 Moves the head office to Tsukiji
2015 90th Anniversary
2016 Launches the long-term vision “Century 2025”
2018 Begins operations at all facilities of the Sanki Techno Center2019 Begins operations at the Yamato Product Center

2010

2020

2011 Great East Japan Earthquake2015 Adoption of the Sustainable Development Goals
2019 Start of the Reiwa era in Japan

2020

2025

th

MIRAI
2030
2030

Global COVID-19 pandemic

2050
Vision for 2050

Sanki, the “Enduring
Company of Choice”

Long-Term Vision （FY2016–2025）“Century 2025”
The Sanki Engineering Group regards all people
involved in the Group as stakeholders, including
customers, shareholders, investors, suppliers,
business partners, employees, local communities, andgovernment and administrative agencies. Over the
next ten years, we will strive to become the companyof choice for all of them.

2

READ MORE

Phase

P.26

Phase

3

4-year period to
become the companyof choice

Increased reliability will encourage more
stakeholders to choose our company

FY2022-2025

3-year period toenhance reliability

FY2019–2021

1

Phase

3-year period toenhance quality

FY2016–2018

08

SANKI REPORT 2022

09

Introduction

Business Overview by Segment(Year ended March 2022)

Facilities Construction Business
Net Sales

155.4 billion yen*

Net Sales
Composition Ratio

81%

HVAC and Plumbing for Building,Industrial HVAC, and Electrical Systems

75%

Our Facilities Construction Business isconducted in ways that are friendly to bothpeople and the environment and throughsystems that are convenient, comfortable andefficient, and also save energy. We are engaged
in wide-ranging fields, including HVAC andplumbing systems for buildings, industrial
HVAC systems, and electrical systems.

Main Sales Items

Net Sales
Composition
Ratio● HVAC and Plumbing for Buildings● Electrical Systems• Electrical systems • Telecommunication systems • Electrical civil engineering

Facility Systems Business6● Facility Systems

We serve the needs of offices and otherworkplaces by providing design andproject management for construction
and relocation as well as strategic andoperational consulting services.

%

Main Sales Items

Net Sales
Composition
Ratio• Nuclear power-related facilities• Semiconductor manufacturing facilities• Battery manufacturing facilities• Plumbing system for water supply anddrainage• Food service equipment• Disaster prevention systems• Pharmaceutical and• HVAC systems• Industrial HVAC food manufacturing
facilities
systems• Freezing and• Clean rooms
refrigeration• Environmental
control systems • District heating andcooling plants• Project management and designing of fit-out and relocation of offices andworkplaces• Consulting involving overall work style● Smart Building Solutions• Central monitoring and automatedcontrol systems• ITC solutions• Crisis management (BCP) solutions• IP phone solutions• S ecurity-related solutions

Plants & Machinery Systems Business
Net Sales

35.5billion yen*

Net Sales
Composition Ratio

18%

Machinery Systems Business

5%

Main Sales Items

Net Sales
Composition
Ratio

We provide material handling systems andconveyance systems that meet customer
needs and challenges in supply chain
management.

● Conveyance Systems

Net Sales
Composition
Ratio

13

%

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

Main Sales Items

Environmental Systems Business• Lightweight conveyors• Sorting devices• Distribution-related conveyors• Automated warehouse● Material Handling Systems• FA systems• Airport baggage and cargo handling systems• Clean conveyance systems• Medical handling systems• Material handling systems• Handling information control systems● Water Treatment• Water and sewage treatment facilities• General and industrial waste disposal
and recycling facilities• Sludge recycling facilities● Waste Treatment• Waste incineration facilities• Landfill wastewater treatment facilities

10

SANKI REPORT 2022

• Industrial wastewater and waste
gas treatment facilities• Plant facilities for the food andchemical industries• Sludge incineration
facilities

Group Companies

Major Projects

Organization (as of April 1, 2022)

Facilities Construction Business

Board of Directors● Sanki Techno Support Co., Ltd. ● Sanki Construction Engineering (Shanghai) Co., Ltd.

Board of Company
Auditors

President● THAI SANKI ENGINEERING & CONSTRUCTION CO., LTD.

Management Meeting● Tomakomai Netsu Service Co., Ltd.
HVAC and Plumbing for Buildings Business Industrial HVAC Business

Secretarial OfficeInternal Audit Office
Management Planning
OfficeLegal Affairs Office
Supercomputer Fugaku

Electrical Systems BusinessFukuoka High Court, District Court, Family Court, and Summary Court Building

Smart Building Solutions BusinessLabor Safety and Health
Promotion Office
Chief Cost Inspector
OfficeMechanical &Electrical Contracting Headquarters
Sales Administration Division
Technical Administration Division
Procurement DivisionInternational Business
Administration DivisionTokyo BranchInformation Systems
OfficeFacility Systems BusinessYokohama Branch OfficeSustainability
Promotion Division

Kanto Branch Office

General Affairs and Human
Resources Division

Chiba Branch Office

Accounting Division

Ibaraki Branch Office

Sanki Techno Center
Technical Research &Development Center

Kansai Branch
Kyoto Branch Office

Abeno Harukas

Tokyo Midtown Hibiya

Toyoda Gosei Memorial Gymnasium (ENTRIO)
Kobe Branch Office
Shikoku Branch OfficeGroup Companies
Machinery Systems
Business

Major Projects

Chubu Branch
Shizuoka Branch Office

Machinery Systems BusinessToyota Branch Office●S anki Sangyo Setsubi Co., Ltd.

Mikawa Branch OfficeEnvironmental Systems
Business

Kyushu Branch Office
Hokkaido Branch Office●S anki Kako Kensetsu Co., Ltd.
●S
 anki Kankyo Service Co., Ltd.
●A QUACONSULT Anlagenbau

GmbH

Chugoku Branch OfficeEnvironmental Systems Business

South Wing of Narita International Airport’s Terminal 1

Minami-Gamo Purification Center●A EROSTRIP Corporation

Tohoku Branch Office
Hokuriku Branch Office●S endai Kankyo Hozen Co., Ltd.
●P FI Okubo Techno Resource

Plants &Machinery Systems Headquarters

Co., Ltd.

Machinery Systems
Administration Division
Environmental Systems
Administration Division
Facility Systems Division
U.S. Forces Yokota Air Base Cargo Handling System

SANKI REPORT 2022

Clean Hill Tenzan

11

SANKI REPORT 2022

12

P.3 4

Facilities Construction Business

HVAC and
Plumbing
for Buildings
Business

Industrial HVAC
Business

32%

30 %

Net Sales for Fiscal 2021

193.1

billion yen*

Electrical Systems
Business

13 %Environmental
Systems Business

Machinery
Systems Business

13 %

5%

Facility Systems
Business

6%

Plants & Machinery Systems Business
Real Estate Business 1 %

P.3 8

P. 42

Real Estate Business
Net Sales

2.4 billion yen*●Real Estate Leasing

includes operations in the• L and leasing

and building management.
We are striving to expand
into higher value-added realestate while taking advantage
of our current technology.

SANKI REPORT 2022

Main Sales Items

Our Real Estate Businessareas of real estate leasing

13

Net Sales
Composition Ratio•B uilding leasing●B uilding Maintenanceand Management• F acility maintenance andupgrades1%*Includes items not listed in thegraph such as 0.5 billion yen inother net sales and 0.7 billion
yen in elimination of intersegment transactions.

Introduction

Financial and Non-Financial Highlights
Financial Data (Consolidated)

Non-Financial Data

Orders Received and Net Sales

Gross Profit Margin■ Orders Received

202.2

193.1

Up 3.4%
year-on-year

billion yen

15.6

Up 1.6%
year-on-year

billion yen

217.0 212.3

191.1
170.1

● Gross Profit Margin■ Net Sales

194.0 207.6

195.5 190.0

202.2 193.1

14.7

%

14.9

15.1

Rate of Annual Paid Leave Taken

Consolidated

Consolidated

2,607

Up 0.5 points
year-on-year

15.5

Number of Employees

15.6

15 381

2018

2019

2020

()

2021

2017

2018

2019

2020

2021 ()

55.6

Male

%

%

2017

Total

85
2,226

FemaleMale%

Female

53.2
69.7

%

%

As of March 31, 2022

Equity Ratio

Ordinary Income and Profit Attributable to Owners of Parent■ Ordinary profit■ Profit Attributable to Owners of Parent● Equity Ratio

9.8

6.4

51.2

Up 19.8%
year-on-year

Up 10.0%
year-on-year

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

11.2
9.0

7.4

11.2

9.8

8.1
5.9

7.5

51.5

48.6

%

45.8

Rate of Reinstatement afterChildcare Leave

Average Monthly Overtime
Work per Person

Consolidated

Consolidated

95.2

Down 2.2 points
year-on-year

Down 4.8
pointsyear-on-year

%

53.4

48.2

51.2

6.4

Volume of GHG emissions(Scope 1 and 2)
Consolidated

2018

2019

2020

ROA and ROE

2017

2016

■ Special Dividend■ Ordinary Dividend● ROE
Up 0.8 points
year-on-year

%

7.0

85

Up 0.4 points
year-on-year

%

6.6
6.0

6.0

4.3

14

2020



SANKI REPORT 2022

73.8

yen

73.9
8.6



2019

2021 ()7,849● Payout Ratio

Up 5 yen
year-on-year

10.3

4.5

2018

Annual Dividend per Share and Payout Ratio

● ROA

5.5

()

2021



4.7



55.5

7.0

20

5.5



40.0

()

15
20

40

2017

2018

25
70

2019

77.6

10
70

2020

Down 2.6
pointsyear-on-year

t-CO2

%

Number of Registered Patents
73.8

455

15
70

()

cases

As of March 31, 2022

Down
5.1 hours
year-on-yearhours

Year-on-Year Comparison of
Problems and Complaints during
Construction

24

Down 25%
year-on-year

fewer
cases

FY2021

FY2021

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

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

Consolidated

Non-consolidated

35,848Up 26.1%
year-on-year

t-CO2

94.8

Down 1.8
pointsyear-on-year%

FY2021

FY2021

Down 3.8 points
year-on-year

2021

23.9

FY2021

3.9
2017

FY2021

FY2021

Test and R&D Expenditures

ICT Investment

Consolidated

Non-consolidated

1.48

Up 0.7%
year-on-year

billion yen
FY2021

1.40

Up 12.0%
year-on-year

billion yen
FY2021SANKI REPORT 2022

15

Message from the President

Message from the President

We will contribute to creating a sustainable society
by providing sophisticated engineering toward
becoming the “company of choice.”
Hirokazu Ishida
President

Promoting Sustainability Management
out its ultra-long-term vision, “Vision for 2050—Sanki, The
Enduring Company of Choice.” We furthermore identified
five material issues* toward achieving a sustainablebalance between enhancing the Sanki Engineering Group’s
corporate value and improving its environmental andsocial value. We also announced Sanki’s Carbon-Neutral
Declaration . These efforts demonstrate once again ourpolicy of vigorously promoting sustainability management
both at home and abroad. Creating comfortableenvironments and pursuing energy conservation anddecarbonization are at the heart of our mission, and thefact that every solution we offer is directly linked to therealization of a sustainable society has become a powerfulsource of motivation for our employees.

ince its founding in 1925, the Sanki EngineeringGroup has expanded its business by utilizing
diverse component technologies related to social
infrastructure and has contributed to the development ofsociety at large by creating comfortable environments inthe face of the changing needs of the times. We recognizethat our business is closely aligned with the pursuit ofsustainability, a continuing global trend, and believe thisis clearly expressed in our management philosophy: “Wecreate comfortable environments through engineering andwidely contribute to social development.”
In this context, the Group established the Sustainability
Committee in November 2021, formulated its Sustainability
Policy, based on its management philosophy, and laidS

*Five material issues: Contribute to a carbon-free society, Pursuit of happiness for colleagues, Use engineering to build a comfortable environment, Create new social value, Stableearnings and stronger business baseBusiness Results for Fiscal 2021 and Review of the Medium-Term Management Plan
will suffer a significantly negative impact. In addition, a
prolonged weakness of the yen may affect our customers’level of incentive and plans to invest, making it more
important than ever to manage risks that may affect SankiEngineering.
Meanwhile, in fiscal 2021, the final year of theMedium-Term Management Plan “Century 2025” Phase 2(FY2019-2021), the Group’s performance exceeded thatof the previous year in terms of both orders and sales,
and all profit items increased due to revenue growth andimproved profitability. I believe we were able to essentiallyachieve our performance and management targets,
including shareholder returns, set forth in Phase 2, as aresult of the numerous measures we promoted under thethemes of enhancing quality in Phase 1 and enhancing
reliability in Phase 2 toward becoming the company ofchoice, which is the goal of our long-term vision “Century
2025.”

he current economic outlook in Japan remains
clouded by factors such as the prolonged effectsof the COVID-19 pandemic and deteriorating
situation in Ukraine. While these are having an increasingly
significant impact on the domestic construction market,
within the scope of the Sanki Engineering Group’s businessdomain, large-scale urban redevelopment projects havecontinued unabated in major cities, capital investment hasremained robust in response to the global semiconductor
shortage, and demand for data and distribution centers
has also increased markedly. We believe the environment
for orders will remain stable for the time being, as theneed for energy-saving facilities, an area in which we
hold a competitive edge, is expected to rise in the future
as a carbon-neutral solution. Nevertheless, there areconcerns that if labor shortages lead to a rise in laborcosts, or a surge in the price of oil and other resources
results in higher raw material costs, our profitability

T▎Business Performance (Billions of Yen)

185.8
168.5
6.8

170.1
7.4

4.6

2016

16

191.1

217.0
212.3
11.2
9.0

207.6
11.2

194.0
7.5

195.5
190.0
8.1
5.9

● Orders received

202.2● Net sales

193.1■ Ordinary profit■ Profit attributableto owners of parent

9.8
6.4

3.9
2017
Phase1

2018

2019

2020
Phase22021(FY)

SANKI REPORT 2022

17

Message from the President

Phase 1 specifically focused on the key initiativesof strengthening core businesses, promoting growthstrategies, and enhancing the Sanki brand. Phase 2 focusedon disclosing financial and capital policies and reinforcing
the dissemination of information as key initiatives. As aresult, the Company was able to achieve steady growth inoverall performance. During Phase 1, however, extremely
strong orders came at the price of an overload of work,
which significantly increased the Company’s workload,
especially for onsite employees. Therefore, during Phase 2,
we kept the workload at a constant level while thoroughly
implementing a profit-oriented business policy of reducing
the number of problems and complaints as well as
occupational accidents, and as a result we were able tocomplete the last fiscal year of Phase 2 with a high profit
margin. While the construction business operates over along time span, we sought to curb long working hours

and cut down on unprofitable construction work, and in
the sense that we were able to link these efforts to profits,
I believe we also succeeded in raising the quality of ourwork.
In terms of enhancing reliability, we clarified ourdividend policy and at the same time switched froma policy of increasing retained earnings for the sake ofenhancing financial soundness to emphasizing capitalefficiency and shareholder returns. This resulted in an
increase of more than 10,000 individual shareholders,which is an indication that the Company’s capital policy
has been well received by the market. In addition, we
produced new commercials and aggressively sought TV
and web exposure to appeal to all stakeholders, which I
hope will steadily increase our visibility and help us secure
excellent human resources in the future.

Launching the Medium-Term Management Plan “Century 2025” Phase 3or the Sanki Engineering Group to achievesustainable growth as the company of choice andas the enduring company of choice into the future,
we must strongly emphasize our future-oriented stancewith sustainability as the pillar. The new Medium-Term
Management Plan “Century 2025” Phase 3 (FY2022-2025)
was based on this concept. In Phase 3, we will continue
pursuing the five key initiatives set forth in Phases 1 and2 as our basic route and enhance quality and reliability
through the maturity and evolution of these initiatives.
At the same time, we will pursue our new initiatives ofcontributing to the sustainability of society, accelerating
work style reforms, and investing toward the next era,
toward achieving sustainable future growth through thecreation of new social value.
With respect to our basic course of strengthening corebusinesses as a common theme for each business segment,
we will return to the basics of “safety first” and re-emphasize
the importance of preventing occupational accidents aswell as problems and complaints during construction. We
will also promote DX to improve operational efficiency andproductivity. As the first step, we will strive to establish a
new cloud-based accounting system by the end of fiscal
2022 as part of an effort to establish a management basethat can flexibly respond to future changes in the businessF

environment. We plan to gradually resume activities at
the Sanki Techno Center, our comprehensive training andresearch facility which, since the start of the COVID-19
pandemic, we have not been able to use as much as we
had hoped, and to actively invest in human resources,
which includes providing education and training for Group
employees as well as subcontractor staff.
With regard to promoting growth strategies, in addition
to developing technologies to meet the needs for carbon
neutrality, we will strengthen our structure in the field ofindustrial HVAC for battery manufacturing in anticipationof the expansion in semiconductor manufacturing andelectric vehicles to meet growing worldwide demand.
While taking on the challenge of bringing to market
conveyance systems and facilities in response to labor
shortages and developing overseas markets for water
treatment plants that excel in energy efficiency, we willcontinue to work on DX, which will generate new value
and business opportunities for each of our businesses.
With regard to reinforcing the dissemination of
information and disclosing financial and capital policies,
we will continue to strive to disclose information andbusiness targets as required by the capital markets and toraise the Company’s public visibility, thereby enhancing
the Sanki brand.

New Initiatives for Phase 3 and Business Portfolio Strategy for the FutureA

18

s for contributing to the sustainability of society, a
new initiative under Phase 3, I believe a key area inwhich we could deliver value to society through

SANKI REPORT 2022

our engineering is contributing to a carbon-free society,which is one of our material issues. We will further enhancethe energy-saving and decarbonizing energy technologies

we have cultivated over the years and apply them indiverse fields, particularly in our Facilities Construction and
Plants & Machinery Systems businesses. At the same time,
we will promote proposal-based marketing based on our
new ambitious targets for the SANKI YOU Eco Contribution
Points program, which marked its tenth anniversary lastyear, to actively reduce CO₂ emissions associated with ourcustomers’ business activities.
Accelerating work style reforms is another new
initiative that is also urgent in terms of responding to
the revised Labor Standards Act of Japan, which will beapplied to the construction industry starting in April 2024.
As we promote the Smile Project, a top-down reform ofwork styles, we must also strive to quickly curb working
hours by improving productivity and establish work
styles for the next generation. We are also focusing on
creating an environment in which employees can work
for a long time, and we have revised our personnel systemwith a focus on embracing diversity, actively promoting
younger employees, and extending the retirementage. Furthermore, we increased career path options byadopting a new dual-track career course for management
and specialists in order to revitalize the organization.
With regard to investing toward the next era, we willcontinue to invest in our areas of strength, especially indecarbonization technologies, automation and laborsaving technologies, and the LCE* Business, combined withdigitalization. We plan to set aside a highly flexible growthinvestment quota of approximately 20 billion yen for
nurturing new engineering “seeds,” with a special focus onopen innovation and M&A.
In Phase 3, we also disclosed our business portfolio
strategy. While we expect continued growth in our
mainstay Facility Construction Business, quite a few
challenges lie ahead, such as how to participate in projects
to earn appropriate profits amid the ever-expanding
scale of redevelopment properties. The Facility Systems
Business and Machinery Systems Business are growth areasin which we will expand the scope of our operations byidentifying needs as they arise and applying management
resources, including investment in human resources, ina timely manner. In the Environmental Systems Business,
we will strive to mature as an LCE business that can
expect stable profits, while also considering structuraltransformation, including overseas expansion. While oursocial infrastructure business is not likely to suddenly run
out of work tomorrow, in these rapidly changing times, wemust be increasingly sensitive to changes in the businessenvironment and needs. We will not simply pursue size,
but will continue to grow honestly as we have in the past
to ensure stable earnings and a stronger business base ,which constitutes one of our material issues.

*Life Cycle Engineering is a business concept of the Sanki Engineering Group. Throughout the life cycle of a building, we provide services ranging from new construction, repair, andmaintenance to renewal and reconstruction.

Creating a Sustainable Society
iscal 2022 represents an important milestone
year for the Sanki Engineering Group as we take a
giant step toward achieving further evolution anddepth in our sustainability management. We are preparing
concrete initiatives to realize sustainability, including theestablishment of KPI/KGI linked to Phase 3 and information
disclosure based on TCFD recommendations, and we havealso established a new Environmental Policy and Human
Rights Policy . This past June, we appointed our first female
external director, and we are achieving steady progressin establishing our corporate governance to meet thestandards required by the Tokyo Stock Exchange’s Prime
Market.
The 100th anniversary of our founding in 2025

F

will mark a milestone in our ongoing efforts to build asustainable society. With this in mind, we will strive to
steadily implement Phase 3 as the culmination of ourlong-term vision “Century 2025,” with a strong awarenessof what lies ahead. We realize that in order to achieve
the ambitious goals we have set for ourselves, including
carbon neutrality by 2050, we need to reform various
aspects of our structure, technology, and awareness.
We are determined to accomplish these reforms in our
pursuit of happiness of colleagues and to share thefruits of our efforts with our stakeholders. We hope you
are as excited as we are for the future progress of the
Sanki Engineering Group.

SANKI REPORT 2022

19

Sanki Engineering’s Future Vision and Value Creation

Promoting Sustainability Management
Sanki Engineering’s Future Vision and Value Creation

The Sanki Engineering Group, with its strength in creating comfortable environments through engineering, will contributeto the realization of a sustainable society by promoting sustainability management based on its five material issues tosimultaneously enhance corporate value and improve environmental and social value.

Sanki, the Enduring
Company of Choice
Striving to be a company that contributes
to the realization of a sustainable world byusing engineering to resolve social issues
such as carbon neutrality and createa pleasant environment

2050

Promoting Sustainability Management

Sustainability Policies
Aiming to realize a strong business base and a sustainable
society by “creating comfortable environments throughengineering and widely contributing to social development”

P.26
Long-Term Vision“Century 2025”
Phase 2

P.24

P.04

20

SANKI REPORT 2022

“MIRAI 2030 ”

Pursuit ofhappiness forcolleagues

on
me
nta
l an
ds
We create comfortableenvironments through engineering
and widely contribute to social
development.

Im
pro
ve
en
vir

Management
Philosophy

2030

Phase 3

oc
ial
va
lue

Phase 1Five material issues

Contribute toa carbon-freesociety

Create newsocial value

Strengthencorebusinesses

Promotegrowthstrategies

Strengthen
information
dissemination
capabilities

Sanki’s Carbon
Neutral Declaration

Enhancethe Sanki brandFinancial
andcapital ESG

Stable earnings
and stronger
business base

P.25

Use engineering tobuild a comfortableenvironment

Improve corporate value

SANKI REPORT 2022

21

Sanki Engineering’s Future Vision and Value Creation

Our Value Creation Process

SocialIssuesAging infrastructure

Declining population,
falling birthrates,
and aging population

Work style reform

Spread of COVID-19

Climate change

Stakeholder
Needs

Automation, labor-saving, and higher productivity

Infrastructure maintenance and upgrades

Safe working environments

Creation of comfortableenvironments

Disaster prevention, mitigation, and resilience

Adaptation to the “new normal” caused by COVID-19

A better, sustainable society  
OutputBusiness Activities● Capital Assets(FY2021)94.2 billion yen◦Net assets◦C omprehensive training and research facility(Sanki Techno Center)

Intellectual Capital◦P roven track record and advanced technicalskills across a broad range of businesses

1.48 billion yen◦Number of employees

2,607◦Average training
cost per capita

76,000yen/year

Machinery
Systems
Business

Social and Relationship Capital◦Credit-worthiness fostered over theyears and a solid customer base
◦Members ofcompanies
subcontractor groups

920◦Collaboration with business partners

Natural Capital
Consideration for the environment◦Input of energy and water resources◦ROE◦Net sales

193.1 billion yen◦Annual dividends per share

27 projects“Century 2025”
Phase1

Phase2from25 reduction
FY20200.44*2Intellectual Capital◦Number of registered patents(as of March 31, 2022)

455 cases

Human Capital

Facility
Systems
Business

Kanae Tochigi Factory No. 3 Factory Building◦Project management technician (civil works,
construction, electrical construction, pipelaying works)

1,277 persons◦Average monthly overtime work per person

23.9 hours◦Rate of paid leave taken per person

55.6 %

Social and Relationship Capital

Medium-Term
Management Plan Phase 3
Company of choice

Ultra-long-term vision “Vision for 2050”

7.0 %85 yen51.2 %

Manufactured Capital◦Industrial accidents frequency rate

Construction
Long-Term Vision◦Equity ratio*1◦Reduction rate for number of problems andcomplaints during construction

Major Projects

Sanki Engineering
Group
Management
Philosophy
Environmental
Systems
Business

202.2 billion yen◦Large-scale construction
projects

Facilities
Construction
Business

Financial Capital◦Orders received

Procurement◦Yamato Product Center

O
p
nt ,
M e rat i oe meainte n a n d M a n a g c t i o n
n a n ce , a n d I n s p e

18 locations

in(FY2021)

Major Products and Services

Manufactured Capital◦Domestic bases (branches
and branch offices)● Value Created

Our Value Creation Process

ing and Desig
Plann
nFinancial Capital

Human Capital

Outcome● Major Products and Services(FY2021)◦Test and R&D
expenditures ofContinuous Enhancement of Corporate Value

Decarbonization

Input

Sanki Engineering’s Future Vision and Value Creation

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 a sustainable society by creating value at eachstep of the business process and in every business area.

P.26

Environmental Impact

P.20
P.24

Sanki Engineering Group Material Issues

Hachinohe City Eastern Wastewater Treatment
Plant◦Energy use

22,474 MWh

Use engineering to build a comfortable environment

Create new social value◦Water use

37,065 m3

Contribute to a carbon-free society

Pursuit of happiness for colleagues◦GHG emissions(Scope 1 and 2)◦Industrial waste

7,849 t-CO2
18,616 t◦Closer cooperation with subcontractors through subcontractor
groups◦Exchange views with business partners

30 times

Natural Capital◦CO2 reduction based on our proposals(for ordered projects)◦Reduced environmental impact throughpromotion of major energy creation initiatives◦Volume of water treated using SankiEngineering products

35,848 t-CO2
5,066 t-CO2
250 million m3◦Provision of facilities equipped with highly efficient energy saving
facilities based on ZEB

Stable earnings and stronger business base

*1 Construction projects of over 1 billion yen each *2 Sanki Engineering construction sites (Sanki Engineering Co., Ltd. and business partners)

22

SANKI REPORT 2022

SANKI REPORT 2022

23

Sanki Engineering’s Future Vision and Value Creation

Sanki Engineering Group Materiality (Key Issues)

Materiality Identified
We identified five material issues◦Materiality Mapping Diagramwith a broad perspective andcorporate value.” These issues

Use engineering
to build acomfortableenvironment

Contribute toa carbon-freesociety

Im
pro
ve
env
iro
nm
ent
al

Stable earnings
and stronger
business basethe Medium-Term Management

Materiality 2
Pursuit ofhappiness forcolleagues

Createnew social
value

Materiality 2
Materiality 4

Plan, and specific targets havebeen set to achieve them.

P.28

New Measuresfor Phase 3

Pursuit of happinessfor colleagues
Materiality 3

High
Improve corporate value
Materiality

Contribute to acarbon-free society

Use engineering to build acomfortable environment

Materiality 5
Materiality 4https://www.sanki.co.jp/en/csr/materiality/

Create new social value

Materiality Identification Process
STEP1
Identify issues

STEP 2
Prioritize and validate◦Evaluate and prioritize the issues identified on the two axes of improving corporate value andimproving environmental and social value and designate them as the five material issues◦Examine whether issues important to the Group have been addressed and whether stakeholder
expectations have been reflected, then finalize

STEP 3
Final review and approval◦Confirmation and review by each department◦Review and approval by the Sustainability Committee◦Deliberation and decision by the Board of Directors

STEP 4
Review and advancement◦Incorporate materiality into the management plan and set targets◦Review of progress toward materiality and targets and report by the Sustainability Committee tothe Board of Directors◦Update material issues as needed based on social changes and progress of activities

Guidelines, etc.,
referred toin STEP 1

SANKI REPORT 2022

Sanki Engineering Group Value Chain

Stable earnings andstronger business bas

We will contribute to realizing carbon neutrality by applying the energy
conservation and energy creation technologies we have cultivated to diverse fields
in facilities construction, and plants and machinery systems.
◦Promote decarbonization◦Promote the renewable energy power generation business◦Expand the decarbonization-related market
We will aim to achieve sustainable growth by creating an environment in which ourhuman resources, our invaluable assets and fellow workers, can pursue happinessthrough their work.
◦Improve human resource development and technology ◦Promote work stylereforms ◦Respect human rights ◦Promote diversity
We will contribute to constructing a diverse array of comfortable environmentsthat support society by developing comprehensive engineering capabilities that
integrate our component technologies across the Group.
◦Build strong social infrastructure◦Diversify the water treatment businessWe will rise to the challenge of creating new social value by mobilizing all our
technologies and knowledge in a continuous effort to take the initiative in meetingthe changing needs of society.
◦Promote activities that contribute to society◦Expand the automation and labor-saving market◦Expand consulting services
We will strive to build a resilient and flexible management base that generates
stable earnings to remain a company that meets the needs of society andcontributes to its sound development for years to come.
◦Strengthen the governance system ◦Thorough compliance◦Promote occupational safety and health ◦Improve quality◦Increase productivity ◦Promote DX ◦Secure stable long-term business◦Returns to stakeholders

Sanki’s Carbon Neutral Declaration
Initiatives for energy conservation and energy creation aimed at decarbonization are also directly linked to the Sanki EngineeringGroup’s core business as a total engineering company. Accordingly, we have positioned “Contributing to a Decarbonized Society”(In-house) Long-term vision, business strategy, management plan, exchange of opinions with officers and departments, in-housesurveys(External) ISO 26000, SDGs, GRI standards, SASB standards, examination and evaluation of ESG (DJSI, etc.), integrated report survey,
opinions and advice from outside experts and advisers, The Global Risk Report

P.44

24

Materiality 5

Evaluate business activities and their impact from the following, and identify 34 issues◦The value chain status, risks and opportunities, long-term vision, and strategy of the Group’sbusiness activities◦International guidelines, the economic, social, and environmental external environment, andsocial demands

Initiatives

Sanki Engineering Group Materiality

were reflected in measures under

Materiality 1

Materiality 3

and
soc
ial
val
ue

social value” and “improving

Materiality (Key Issues)

Materiality 1

High

are assessing them in terms of“improving environmental andOur Contributions to Sustainability

Sanki Engineering’s Future Vision and Value Creation

The Sanki Engineering Group determines its five material issues by assessing issues selected from a broad perspective
in terms of “improving environmental and social value” and “improving corporate value.” By strategically allocating
management resources to measures corresponding to the materiality, we aim to realize a resilient managementfoundation and sustainable society.

P.46

Stakeholder Engagement

as a top priority among the material issues identified. We have established interim and long-term targets to achieve carbon
neutrality by 2050.

Sanki’s Carbon Neutral Declaration
The Sanki Engineering Group is making serious efforts to address the climate change crisis facing the world and aims to achieve carbon neutrality for the Group’s own GHG emissions (Scope
1 and 2) by 2030 and for GHG emissions including the supply chain (Scope 1, 2, and 3) by 2050.

SANKI REPORT 2022

25

Growth Strategies and Sustainability Management

Medium-Term Management Plan“Century 2025” Phase 3 (FY2022–2025)

Course of Action for Phase 3 (FY2022–2025)
Measures Carried Over from Phase 1

In Phase 3, we will continue to work on the three measures as we have done in Phase 1 and 2 to further improve quality.
Measures forEnhancing
Quality

1

Strengthen
Core
Businesses

Review of Phase 2 (FY2019–2021)

S trengthen business baseUse of digital and robot technologies

FY2019 results

FY2020 targets

FY2020 results

FY2021 targets

FY2021 results

200.0 billion yen

207.6 billion yen

200.0 billion yen

190.0 billion yen

200.0 billion yen

193.1 billion yen

Gross profit (%)

30.0 billion yen(15.0%)

32.1 billion yen(15.5%)

31.0 billion yen(15.5%)

28.7 billion yen(15.1%)

32.0 billion yen(16.0%)

30.2 billion yen(15.6%)

9.0 billion yen(4.5%)

11.2 billion yen(5.4%)

9.5 billion yen(4.8%)

8.1 billion yen(4.3%)

10.0 billion yen(5.0%)

9.8 billion yen(5.1%)

Annual dividend

FY2019 results

FY2020 results

5.4%

4.3%

Dividend per share of 60 yen or higher

95 yen80 yen85 yen1 million shares(cumulative total:
3,958,000 shares)

About 5 million shares

1,958,000 shares

Total return ratio

70% or higher

111.4%

97.3%

95.7%

8.0% or higher (final fiscal year)

8.6%

6.6%

7.0%

25

Dividend ■ Extra dividend (yen)per Share■ Ordinary dividend (yen)

20
10
20
2016

10
70

70

FY2019–2021

40

15
20
2017

2018

Phase12019

Phase2

Strengthen Core
Businesses

Improve component technologies
and achieve stable growth

Promote Growth
Strategies

Pursue future growth in the areasof technology and business

Enhance the Sanki
Brand

Develop human resources thatpossess the Sanki spirit

Refining Technical Skills andHuman Resources to Enhance
Quality

1 Enhance Quality

SANKI REPORT 2022

(FY)
2021 （年度）

2020

FY2016–2018

Phase

15
70

Phase 2 Enhance
Reliability
Further Pursue Quality• Improve construction productivity• Meet energy-saving and labor-reduction needs• Promote technological research and development• Continue to receive orders for stock projects• Create better work conditions• Improve internal communication

Disclosure of Financial andCapital Policies
Reinforce the Dissemination ofInformation

PromoteGrowthStrategy

Measures forEnhancing
Quality3

E stablish the Earth MIRAI Project to explore newtechnologies
Conduct capital investment to promote carbon
neutrality for the Company
Strengthen the SANKI YOU Eco Contribution Point
systemContinue to support environmental conservation in
Antarctica
Contribute to society by supporting sports and the arts

Enhance the
Sanki Brand

Machinery Systems Business

Environmental Systems BusinessE xpand sales of products that meet energy-saving needs
Develop energy creation-related businesses
Promote LCE business (stock business)

FY2022–2025
Maturity and Evolution of Measures to Enhance Quality
and Reliability

Acquisition oftreasury stockE xpand proposals including the development of newtechnology to realize a carbon-free society
Strengthen the structure of industrial HVAC for
semiconductor and other manufacturing facilities inand outside Japan
Expand business by developing overseas markets forwater treatment facilities
Promote open innovation (cooperation between
different industries, universities, and venturecompanies)
Business reform and creation of new business
opportunities through DX ultivate automation and labor-saving market
CExpand sales of sorting systems for the logistics market
Commercialization of facility predictive maintenance using
AI diagnosis

5.1%

1 million shares(cumulative total:
2,958,000 shares)

2

Plants & Machinery Systems Business

FY2021 results

5.0% or higher (final fiscal year)

ROE

S trengthen the total integration business of building ICT
Expand onsite information and communication
infrastructure businessExpand consulting service offerings

Measures forEnhancing
Quality

Phase

3

Company of
ChoiceMedium-Term Management Plan “Century 2025” Phase 3

FY2019 targets

Phase 2 (FY2019–2021) Management Targets

26

Facility Systems BusinessNet sales

Ordinary profit ratioI mprove technology to prevent occupational accidents andtroubles during construction
Promote occupational safety and health together with the
Health and Safety Cooperative Association
Human resources development aimed at acquiring new
unique technologies
Improve business efficiency through the operation of a new
business system
Introduce the latest SFA and deploy finely tuned sales
activities

Facilities Construction BusinessIn Phase 2, we came close to attaining our target of 200 billion yen in net sales despite the impact of the
COVID-19 pandemic. We were also able to maintain a high level of gross profit margin as a result of oursustained efforts on the Key Initiatives, which began in Phase 1.

Ordinary profit(%)

Common Points

Growth Strategies and Sustainability Management

Sanki Engineering formulated the Medium-Term Management Plan “Century 2025” Phase 3 (FY2022–2025) to put the finishing
touches to its long-term vision “Century 2025” launched in fiscal 2016.
We will continue to work toward achieving maturity and evolution of the Key Initiatives of Phases 1 and 2, in which we
strived to enhance quality and reliability. In Phase 3, we will build on past initiatives and implement new ones to become thecompany of choice.

Maturity and Evolution of Measures to Enhance Quality

Contribute to the Sustainability of Society
Accelerate Work Style Reforms
Invest toward the Next Era

Measures Carried Over from Phase 2

Maturity and Evolution of Measures toEnhance Reliability

We will focus on further raising awareness of Sanki Engineering measures
under Phase 2 to broaden the understanding of our stakeholders.
Measures forEnhancing
Reliability

1Disclose
Financial andCapital Policies① Stable and sustainable returns for stakeholdersP ayout ratio of 50% or moreA
 nnual dividend per share of 70 yen or moreB uyback of about 5,000,000 treasury stock over the termof Phase 3* Cumulative total during the plan periodF urther improve payment terms for business partners② ROE target: 8% or more

Measures forEnhancing
Reliability

2Strengthen
Information
Dissemination
CapabilitiesI ncorporate information transmission
methods that are in line with the times, suchas online video sites
Enhance content to be disseminated suchas corporate governance, news releases
on technological development, and social
contribution activities*The ESG Policy in Phase 2 has evolved into the
Sustainability policy in Phase 3.

SANKI REPORT 2022

27

Growth Strategies and Sustainability Management

Message from the Chief Financial Officer

New Measures for Phase 3 (FY2022–2025)
Enhance the Company’s Quality
and Reliability

Investing in the future will enable us to

Sanki Engineering disclosed its ESG Policy under Phase 2 and has been establishing its framework forsustainable management. In Phase 3, which will mark the culmination of our long-term vision, we will
implement three new measures for achieving sustainable future growth.

New
Measure1

 romote the development of new technology to realize a carbon-free societyPReduce overall greenhouse gas emissions, including in the supply chain
Promote CSR procurement in consideration of environmental impacts and humanrightsStrengthen the SANKI YOU Eco Contribution Point system
Formulate and make use of a BCMS to maintain an effective BCP

Contribute to the
Sustainabilityof Society

New
Measure2

Director, Executive Officer, General Manager of the Accounting Division, andChief Financial Officer

 ecarbonization technology (energy-saving, energy creation, etc.)
DAutomation and labor-saving technology (material handling)
LCE business (stock business)
DX

Long-Term
VisionMeasuresNurture the growth of new engineeringbusinesses in these fields that society
requires as we advance toward the future rowth investment of about 20 billion yen
GExternal collaboration such as open innovation
M&A“Century 2025”
Becoming even more thecompany of choice forstakeholders

KPIs for Phase 3 (FY2022–2025)
Facilities Construction
Business

Facility Systems Business
Machinery Systems Business28◦I mplement root-case analysis of troubles/claims within 5 years following the completion of construction
work: 100%; report on root-cause analysis: 4 times per year◦D evelop digital and robotic technologies related to construction: 5 projects per year; actual cases ofapplication of developed technology: 5 projects per year
◦Orders received for consulting/facility engineering: 400 million yen◦Orders received for projects related to NeWSICT (Next Work Style with ICT): 500 million yen◦Orders received for project management and construction work resulting from consulting and other sales
approached: 2.1 billion yen◦Net sales of robot systems: 5.0 billion yen (cumulative)

Environmental Systems
Business◦Orders received (cumulative): AEROWING: 3.6 billion yen; G3 decanter centrifuge: 2.0 billion yen; fluidized bed
incinerator: 2 unitsE(Environment)◦S copes 1, 2: 40% reduction in emissions from FY2020 levels◦S cope 3: 10% reduction in emissions from FY2020 levels◦R educe CO₂ emissions based on the SANKI YOU Eco Point system by an additional 30% compared to the 3-year
average from FY2018 to FY2020

S(Social)◦R ate of childcare leave taken: Male 50% Female 100%
◦R aise the ratio of women in managerial positions to 3.0% by April 2026

Other◦I nvestments for the next era (decarbonization technology, energy-saving and labor-reduction technologies,
LCE business, DX): 20.0 billion yen

SANKI REPORT 2022

We achieved overall success in the objectives of the MidTerm Management Plan “Century 2025” Phase 2, in which
we promoted each Key Initiative under the theme ofenhancing reliability. Although the COVID-19 pandemic
has had a certain degree of impact on our business, I feel
our performance was generally favorable and that the
Sanki brand improved as a result. On the financial side, we
disclosed our financial and capital policies and actively
returned profits to shareholders through dividends andshare buybacks, resulting in a significant increase in thenumber of individual shareholders and a stable stock price.
We were able to consistently implement our capital policy
because we have become a company that with confidence
can generate profit through measures such as thoroughcost control and improved productivity in construction,
which we pursued in Phases 1 and 2, and in my analysis
this is the most important factor.
In the Mid-Term Management Plan “Century 2025”
Phase 3, we disclosed our financial and capital policies
as our performance and management targets in orderto maintain and improve our solid financial base, as wehave done in Phase 2. The net sales target of 220 billion
yen for the final year (FY2025) will not be easy to achieve
in light of the current uncertain business environment.
Fortunately, we have an abundant amount of work, and wewill strive to achieve the target by improving profitability
in combination with work style reforms while also focusing
on the Machinery Systems Business and Facility Systems
Business, which we have positioned as strategic ventures.
While we intend to steadfastly meet the targets towhich we have committed under our financial and capital
policies, we believe that in Phase 3 we will enter a stageof also promoting investment, as opposed to the Phase
2 focus on shareholder returns. Now is the time to invest
in the next era, as we have made progress in improving
quality and have been able to secure high profit margins.
Specifically, we have set a growth investment of 20
billion yen, and in addition to the promotion of DX andResearch and development for carbon neutrality, we willcontinue to consider and implement new drivers for the
future, including M&A. On the other hand, cash flow will

be consistently maintained at around 20 billion yen as
working capital, and we will consider using leverage toincrease capital efficiency to support further investments.
While maintaining net assets at the current level, we willsell investment securities as appropriate to steadily invest
in growth.
Stable and continuous returns to stakeholders willcontinue to be a key mission. While our shareholder return
policy will still be centered on dividends, we also plan toacquire and cancel treasury stocks by keeping an eye on
the status of profits, including ROE, and dividends. For ourbusiness partners, we plan to continue to provide returns
such as improved payment terms, as we did in Phase 2. To
ensure that we do not betray the stakeholder expectation
for reliability we have built up, we will continue to work
diligently to achieve the performance targets set forth inPhase 3, and aim to achieve both sustainable growth andfinancial soundness.

Message from the Chief Financial Officer

Invest Toward
the Next Era

Fields3

Yoshio Kawabe

 ontinuation of the Smile Project, led by top management
CReform of the personnel system centered on the active
appointment of young people and extension of theretirement age
Utilize DX to balance improvements in quality andproductivity with reduced working hours
Secure and nurture human resources with due consideration
for diversity

Accelerate Work
Style Reforms

New
Measureachieve sustainable growth.

Growth Strategies and Sustainability Management

New measures from Phase 3

Performance Targets
FY2025

Targets for
Final Fiscal
Year

Net sales

220.0 billion yen

Gross profit (%)

16.5%

Ordinary profit

12.0 billion yen
FY2022–2025

Phase 3
Management
Targets

Ordinary profit
ratio

5.0% or higher

Payout ratio

50% or higher

Annual dividend
per share
Acquisition oftreasury stockROE

70 yen or higher
About 5 million shares*
8.0% or higher

Growthinvestment

About 20.0 billion yen*

*Cumulative total during the plan period

SANKI REPORT 202229

Growth Strategies and Sustainability Management

Case 1ESCO Project at NaraMedial University

Feature1
特集1 カーボンニュートラルの実現に向けて

The Sanki Engineering Group is committed to achieving carbon neutrality by 2050. Climate change is an issue directly connected
to our core business as a total engineering company, and we are addressing it through the active use and introduction of ourenergy-saving and carbon-free energy technologies in such fields as facility and plant construction. Furthermore, the SANKI
YOU Eco Contribution Points system converts our CO2 reduction solutions, offered to customers, into points that are donatedto environmental conservation activities. We will continue to promote this activity to expand the circle of carbon neutrality
throughout society.
Reduction target for Scope 3 emissions

Reduction measures
TargetNet zero

2020

2025

2050

E xpand business using energy
conservation and energy creation
technologies
Boost promotion of the SANKI
YOU Eco Contribution Point
systemEmissions from Sanki Engineering’s Supply Chain*
Own Emissions

Upstream
Scope 3

Scope 1

1. Raw
4. Transportation
7. Employee
materials
and distribution
commuting
Others: 2. Capital goods, 3. Fuel- and energy-related
activities not included in Scope 1 or 2, 5. Waste generated
in operations, 6. Business travel, 8. Leased assets

Scope 2

Reduction
targets for
Scope 1 and2 emissions

Target-40%
TargetNet zero
2020

2025

2020

Others:9. Transportationand distribution, 10.
Processing of soldproducts, 13. Leased
11. Use of sold 12. End-of-life assets, 14. Franchises,
products treatment of sold 15. Investments

Electricity
use

products

P.48

Demand for energy service company (ESCO) projects hasgrown every year, as companies and municipalities havebeen forced to take action such as renovating buildings
and factories to address growing environmental awarenessand increasingly strict environmental regulations. In an
ESCO project, all expenses for energy-saving renovations
are covered by the reduction in utility costs, thereby
alleviating the cost burden during renovations andcontributing to preserving the global environment. As a
total engineering company, we have long been proposing
ESCO projects for energy conservation and facility
upgrades.
In fiscal 2021, Sanki Engineering participated in an
ESCO project at Nara Medical University and its affiliatedhospitals, which was led by Daiwa Energy Co., Ltd. as therepresentative contractor. We were responsible for theconstruction of HVAC, plumbing, and electrical systems.
This involved reusing waste heat, reviewing the operational
control of equipment, and converting lighting to LED, as
well as partially upgrading the central monitoring systemthat ensures optimal energy management across theentire facility. The facilities we have constructed during
this project are estimated to save energy by approximately
25% and reduce CO2 emissions by about 30% per year,
amounting to over 4,000 tonnes in terms of volume, during
the contract period of this ESCO project, which ends in
March 2035.

Energy conservation needs are growing at drainage
disposal plants around the world, with the increased
demand to reduce power consumption levels. Electricity
used to supply air to the reaction tanks that remove
contaminants from sewage accounts for 30 to 50% of
the power consumed at these plants, and reducing therequired volume of air is expected to save energy for theentire plant.
Sanki Engineering was the first in Japan to market
the AEROWING air diffuser, which generates air bubbles
from resin-based membranes in a reaction tank during
the process of decomposing and purifying organic matter
contained in sewage, thereby significantly reducing theamount of air and power needed for blowers. We are
currently marketing AEROWING II, which boasts evenhigher energy-saving performance and is widely used as adevice that significantly reduces electricity consumption.
More than 100,000 units of AEROWING and AEROWINGII have been delivered in Japan, and over 560,000 havebeen delivered worldwide as of March 2022.

Reductions in
CO2 emissions

4,000

Scopes 1, 2

Scope 3CO2 emissions

CO2 emissions-40 % -10%

Reduced CO2 emissions
by the SANKI YOU EcoContribution Point system

+30%

2025

5,434

t-CO2/year(FY2021/Japan)(estimate)

P.49 Environment

2030

Reductions in
CO2 emissions

t-CO2/year

We endorsed the TCFD (Task Force on Climate-related Financial
Disclosures) recommendations in November 2021. Our disclosure isin accordance with the TCFD recommendations.

Environment

2025

Contributing to Reducing
Power Consumption at
Drainage Disposal Plants

Disclosure of information on climate changerelated risks and opportunities

Now in its 11th year, the Sanki Engineering Group’s SANKI
YOU Eco Contribution Point system contributes, along with
our partners, to preventing global warming and realizing
a sustainable society. We will continue to promote CO2
reductions through the system toward our fiscal 2025 goal of
reducing CO2 emissions by at least 30% compared to the threeyear average from fiscal 2018 to fiscal 2020.

2030

I ntroduce electricity sourced fromrenewable energy
Install solar power generation and otherfacilities

ReductionmeasuresCombustionof fuels

Scope 3

Scope 2SANKI YOU Eco Contribution Point System

Emissions from In-house Activities
Scope 1

Downstream(Sanki Engineering Group)

Saving Energy andReducing CO2 Emissions at
Medical Facilities

Feature 1-10%

AEROWING

Growth Strategies and Sustainability Management

Sanki Engineering Group’s Initiatives for
Realizing Carbon Neutrality

TargetCase 22050
Toward Carbon
Neutrality
Scopes 1, 2, 3

Sanki Engineering Group’s GHG emissions
Carbon neutrality

Scopes 1, 2

2030

2050

*Refers not only to emissions by the business operator itself but also to the total volume of all emissions related to its business activities, and it is classified into Scope 3 emissions(upstream) + Scope 1 and 2 emissions (in-house) + Scope 3 emissions (downstream). Of the 15 categories under Scope 3, “11. Use of sold products” accounts for approximately 90%
of greenhouse gas emissions by the Sanki Engineering Group.

30

SANKI REPORT 2022

SANKI REPORT 202231

Growth Strategies and Sustainability Management

Feature 2

Feature 3

and biological laboratories, thereby contributing to
the advance of medicine, drug discovery, and researchand development. The growing importance of clean
rooms is partly due to the rapidly increasing demand forsemiconductors, now in short supply worldwide. This
represents a growth opportunity for Sanki Engineering,and in the Medium-Term Management Plan “Century
2025” Phase 3, we will focus on strengthening thestructure of industrial HVAC for semiconductor and othermanufacturing facilities as a Key Initiative.
We will continue to meet our customers’ needsby leveraging the know-how and advanced technicalcapabilities we have cultivated over many years.

FY2021

Large-scale construction projects including
construction work related to clean roomsF acility construction for Stage II expansion of the
DENSO Hokkaido Plant
Kurita Innovation Hub, Kurita Water Industries Ltd.

The e-commerce market, which has for some time been expanding due to advances in online activities, has seen an increase inlogistics volume spurred by the COVID-19 pandemic. Sanki Engineering is developing and marketing products for the logistics
industry that facilitate high-performance sorting to help address the excessive workloads and labor shortages plaguing this
sector and thereby contribute to the prompt delivery of goods to purchasers.

Reverse
Sorter™

Major customers Transportation industry
e-commerce industry

Energy-Saving HVAC System for Semiconductor Clean Rooms❶ Efficient use of HVAC air reduces annual power supply by 40%.
❷ Maintains a high level of cleanliness by limiting dust diffusion.
❸ No space required for coils for cooling, allowing for more effective use of floor space.
❹ Developed in FY2018 and currently in the market.

Chilled water 10°C

Chilled water 10°C

40%

C

Vinyl
curtain

Cooling

Operation area
Requiresblowout
temperatureof only around

Dust removal

Chilled
water
15°C



Cooling
Maintenance
area

C

D

C

Production unit

D

D

Production unitDust removal
and cooling

Chilledwater
15°C

Maintenancearea

Requiresblowout
temperatureof around

Maintenancearea

Operation area

Production unit

Production unit

D
C

Maintenance
area



Reduction in
annual power
supplyReverse Sorter™
(in Japanese)

Meris
Bianca™

DOUP System

Ballroom System40%❶ Contributes to enhanced sorting
performance and space-saving.
❷ Allows for the simultaneous sorting of
more items due to a unique mechanismthat pivots the carrier both horizontally andvertically, so sorter chutes can be set up on
the top and bottom as well as on the left
and right.
❸ Saves space by approximately 40%
compared to our earlier sorter models.
❹ Developed in FY2020, sales launched in
FY2021, and currently in the market.
Front view

DOUPⓇ

Space saving

Enhancing Sorting Device While
Saving Space

https://youtu.be/gZUMrynFAZs

Comparison with
our earlier sortermodelsFeature 2 / Feature 3

A clean room is a controlled environment where a highlevel of cleanliness is maintained. This requires the useof different filters and other equipment for the removalof airborne dust particulates and gaseous componentsthat may be harmful to products. In some cases,
controlling microorganisms, bacterial attachments, andother organisms is required, as well as countermeasuresagainst chemical contamination. Sanki Engineering has
been focusing on the research and development ofindustrial clean rooms toward enhanced quality control
in the manufacture of precision equipment, starting withassembly lines at camera factories and photographic
film production lines in the 1960s. Since the mid-1970s
and the construction of production plants around theworld for semiconductor devices and integrated circuits
as key components in computer technology, we havebeen expanding our business to handle a number ofindustrial clean room types, in and outside of Japan, andhave subsequently achieved top-class recognition in theindustry. The technologies and know-how we cultivatedin the wake of the 1980s have been extended to bioclean rooms for medical and drug discovery institutions

Developing Sorting Devices and Systems
that Provide Solutions for the Logistics Industry

Growth Strategies and Sustainability Management

Supporting the Semiconductor Industry with
Sanki Engineering’s Clean Rooms

Upper
level
Carrier

Sorting outlet
Lower
level
Both upper andlower levels can be used

Carriers are not turned upside down

Side viewSupporting Automation and Labor-Saving for Transportand Sorting Operations❶ Supports automation and labor-saving of cargo transport and sorting operations inlogistics centers.
❷ High-speed transport through optimal routes made possible by constant monitoring of
the position and movement of multiple transport robots by the host system.
❸ Facilitates easy installation and smooth expansion and relocation owing to a station-typerollout system that distinguishes it from conventional fixed mechanisms.
❹ Developed in FY2021 and under verification at our R&D center.
Meris Bianca™
(in Japanese)

https://youtu.be/fvCkHpEbziETransport robot

32

SANKI REPORT 2022

SANKI REPORT 2022

33

Growth Strategies and Sustainability Management

Facilities Construction Business

Eiji Mitsuishi
Director, Senior Executive Officer and General Manager of the Mechanical &Electrical Contracting Headquarters

Opportunities and Risks in the Business Environment
Net Sales
Composition
Ratio

Net Sales for
Fiscal 2021

155.4

81%

billion yen

Orders Received (Billions of Yen)
182.5
153.4

157.6 156.7 160.5

165.0

Increased demand for environmentally sound facilities for realizing adecarbonized society
Expanded investments in semiconductor manufacturing facilities and data
centers
Changing views on office environments associated with the spread ofteleworking
Increase in materials and labor costs, and delayed delivery of materials andequipment
Staff shortages, including at subcontractors, in the face of increasingly
large-scale properties

Key Initiatives of the Medium-Term Management Plan “Century 2025” Phase 3
Key Initiative 1

Improve construction quality

Strengthen the Company-wide division of labor system for construction work andenhance construction quality by promoting occupational health and safety in unisonwith the Health and Safety Cooperative Association.
2017 2018 2019 2020 2021 2022 (FY)Forecast

139.6

Key Initiative 2

Reduce the workload of construction managers and improve operational efficiency
by promoting the Smile Site Plan and DX and increase productivity by passing on andfostering technical skills through human resource development.

179.3 171.5

Key Initiative 3

160.02017 2018 2019 2020

34

SANKI REPORT 2022

2021 2022 (FY)Forecast

Boost competitive strength

Boost competitive strength by accurately responding to customer needs throughinformation sharing among locations nationwide, thoroughly implementing cost anddelivery time management through the collection of procurement data for materials
and equipment, and developing technologies in collaboration with the R&D Center.
Key Initiative 4

Orders received increased due to large construction
orders for industrial HVAC and electrical systems. Net sales
were on par with the same period of the previous year,
while profits remained high partially due to an improved
profit margin.
We regularly disseminated information on delivery dates
and prices of materials and equipment internally to
conduct sales activities with an awareness of construction
deadlines and to avoid the risk of price hikes.
We identified issues and developed measures at eachlocation, in addition to implementing a Company-wide
division of labor system for construction work andappropriately allocating personnel by promoting the
Smile Site Plan.
The Technical Administration Division collaborated with
branches and branch offices in conducting construction
quality audits from the design stage to improve
construction quality and prevent problems. In addition,
we thoroughly investigated the causes of problems andcustomer complaints within five years of construction
completion and took action to avoid recurrence, thereby
contributing to higher profit margins.
We identified issues and examined solutions for theactual operation of BIM and promoted the strengtheningof the education system for utilizing BIM software for inhouse engineers.

Kurita Innovation Hub, Kurita Water Industries Ltd.

Kanae Tochigi Factory No. 3 Factory Building

Major Projects
Kurita Innovation Hub, Kurita Water Industries Ltd. (HVAC systems/new construction work)
Kanae Tochigi Factory No. 3 Factory Building (HVAC and plumbing systems/new construction work)
Toyota Technical Center Shimoyama (plumbing and electrical systems/new construction work)
Toyota Industries Corporation Ishihama Plant, Stage I construction work (HVAC and plumbing systems/new construction work)
Facility construction for Stage II expansion of the DENSO Hokkaido Plant (HVAC, plumbing, and electrical systems/extension work)

Improve productivity

Net Sales (Billions of Yen)

155.5 155.4

Major Results for Fiscal 2021

Facilities Construction Business

The Facilities Construction Business has broadly contributed to the developmentof society by providing comfortable environments based on total engineering thatcombines diverse component technologies. A strength of the Sanki Engineering Group
that is directly linked to our core business is contributing to a decarbonized society
primarily through the introduction of energy-saving and energy-creating equipment,
and this will continue to be our top priority as we go forward. Achieving sustainable
development for our business in these uncertain times will require establishing a flexible,
solid business foundation that can respond to any social demand and expectation. We
will steadfastly strengthen our technology, human resources, and business structure,continue to overcome challenges such as eliminating long working hours and promoting
digitalization, and contribute to the sustainability of society as a whole.

Growth Strategies and Sustainability Management

Achieving Sustainable Growth by Leveraging Our
Strengths in Total Engineering

Strengthen business foundation

Strengthen the business foundation through collaboration across the entire Mechanical& Electrical Contracting Headquarters, including the business promotion organizations
at the branches and branch offices, as well as the headquarters organization.

Status of Business Operations and Future Outlook toward Achieving Phase 3
Further promote the Smile Site Plan
Looking beyond the enactment of Japan’s revised Labor
Standards Act in 2024, we will further promote the Smile Site
Plan work style reforms toward simultaneously improving
onsite capabilities and quality and reducing the workloadof construction managers. In addition to continuing theCompany-wide measures implemented to date in areas

such as organizational structure, personnel allocation,
division of labor, and outsourcing, we will closely exchange
opinions on sales information and property status among
each division to level out the workload at construction sites
and implement measures according to the situation basedon progress reviews.

SANKI REPORT 2022

35

Growth Strategies and Sustainability Management | Facility Construction Business

Facility Construction Business

Facility Systems Business

Promoting Technological Development and Project
Proposals that Contribute to Carbon Neutrality
We will contribute to attaining carbon neutrality for ourcustomers and society as a whole by promoting CO2
reductions through LCE, which includes the proposal,
adoption and delivery, optimal operation and management,
and appropriate refurbishment of energy-saving facilities.
As the needs of our customers continue to grow, we willdevelop new technologies and present proposals that
accurately meet their requirements.

Opportunities and Risks in the Business Environment
Change in the office market due to the introduction of
teleworking triggered by the COVID-19 pandemic
Expanding need to introduce effective mechanisms and ICT
tools for work style operations including teleworking
Increased opportunities for ICT collaboration, such as smart
factories using local 5G systems
Increased opportunities for reconstructing and reviewing ICT
infrastructure due to DX-driven change in business models

Facility Systems

Smart Building Solutions

Key Initiatives of the Medium-Term Management Plan “Century 2025” Phase 3• Expand consulting service offerings• Enhance sales and production structures for businessexpansion• Deepen existing business areas

Focus

Major Results for Fiscal 2021

Balancing a Wide Range of Temperature Control and Energy-Saving

Development of an Environmental Testing Facility to Evaluate
Next-Generation Batteries
Value delivered by
Sanki Engineering◦Energy-saving system with highly precise temperature control using proprietary control logic

Environmental testing facilities for the evaluation testingof vehicles and electronic components require a wide
range of temperature conditions as well as highly accurate
controllability in each range. The fields covered byenvironmental testing facilities have recently expanded in linewith the electrification of automobiles, spread of automateddriving devices, and increasing performance of mobile
devices in the telecommunications field.
Against this background, we have developed anenvironmental testing facility for evaluating next-generation
batteries and installed it at our R&D Center. The evaluation
testing of automotive batteries is known to require particularly
stringent temperature conditions, ranging from −40 to+100°C. Our facility uses proprietary control logic to achieve
highly accurate controllability within ±0.3°C and is capable ofreducing operating energy by approximately 40% compared

36

SANKI REPORT 2022

• Strengthen the total integration business ofbuilding ICT• Expand onsite information and communication
infrastructure business• Nurture specialized engineers

Facilities Construction Business

Handling Large-Scale Projects by Establishing 		a Company-Wide Collaboration System
Urban redevelopment projects, semiconductor and otherproduction plants, and research facilities are becoming
increasingly large in scale, which raises the importance of
personnel planning with due consideration for construction
areas and periods. We will establish a construction systemthrough Company-wide collaboration to effectively respondto important properties. The headquarters organization willback up each branch and branch office in terms of sales,
design, and construction quality as well as procurement,
leading to optimal use of business resources and thedevelopment of human resources that transcend expertiseand geographical characteristics.

Growth Strategies and Sustainability Management

Promoting DX Across Divisions
In collaboration with the Technical Administration Division,
R&D Center, and Machinery Systems Administration Division,
we will focus on digitizing internal operations, developing
robot-related technologies, and utilizing BIM to enhancethe efficiency of sales activities and field office operations, aswell as raising productivity by improving construction work
efficiency at construction sites. In addition, we will promote
DX Company-wide by introducing Sales Force Automation
systems and accounting systems and creating a workflow
for various application processes.

to conventional facilities. We will continue to verify the system
to achieve even higher performance and intend to utilize thefacility as a site for open innovation.

Environmental Testing FacilityE njoyed strong sales and profit on sales by focusing
on the need for large-scale office relocation andrevision of space use
Business opportunities for the newly established
Consulting Promotion Division increased as advancesin remote work led to more customers seeking
consultation on optimal workspaces and work stylereformIn the area of building management solutions(instrumentation), we won orders for large-scale
refurbishment projects
In the area of network solutions (ICT), we enjoyedbrisk orders for construction work related to data
centers, which are showing a marked increase ininvestments, in addition to the maintenance of IT
devices used in offices

Status of Business Operations and Future Outlook toward Achieving Phase 3
 e intend to bolster our sales efforts based on theW
key concept of creating workspaces to meet the need
for work style review. The value demanded of an
office is expected to continue changing, so plans callfor strengthening activities related to collaborations
and M&A toward creating new services, expanding
our consulting service offerings, and boosting ourbusiness structure, including increasing the numberof consulting personnel who can design working
environments. Also, facilities engineering services
will be developed to support the study and design ofbuilding facility specifications for customers moving
into an office.

In the area of instrumentation, we plan to increase
orders through total integration of building ICT using
our self-developed products. To this end, businessexpansion will be promoted by strengthening humanresource development and enhancing proposal andtechnical capabilities. In the area of ICT, our focus will
be on the onsite information and communications
infrastructure business as we continue marketing
proposals for information infrastructure facilities todata centers and distribution warehouses, in whichinvestments have grown markedly. In addition, we
will expand the scope of orders by considering
the introduction of local 5G and proposing otherancillary facilities.

SANKI REPORT 2022

37

Growth Strategies and Sustainability Management

Plants & Machinery Systems Business
Machinery Systems Business

Kazuaki Iijima

Major Results for Fiscal 2021

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

Net Sales
Composition
Ratio

Net Sales for
Fiscal 2021

18%

35.5

billion yen

Opportunities and Risks in the Business Environment
Machinery
Systems
Business

Orders Received (Billions of Yen)
36.3

33.7 34.5

12.1

24.2

39.5

36.5

12.0

10.3

21.7

24.2

33.0

8.9

7.8

13.0
28.7

Environmental
Systems
Business

30.6
20.0

Growing need for automation and labor-saving solutions
arising from the decline in Japan’s working population
Expansion in capital investments for logistics facilities
targeting the e-commerce market
Increase in materials and labor costs, and delayed delivery ofmaterials and equipment
Expansion in decarbonization needs arising from Japan’s
declaration to achieve carbon neutrality by 2050
Japanese government policy for promoting PPP and PFI*
Intensified competition due to the adoption of fiscal austerityby local governments*Public private partnership (PPP): A public-private sector collaboration to provide public services. Private financeinitiative (PFI): a representative PPP approach.

2017 2018 2019 2020 2021 2022 (FY)Forecast

Machinery
Systems Business

Environmental
Systems Business

Net Sales (Billions of Yen)

29.1

32.2

9.2

19.9

34.4

11.7

20.4

32.5

38.0

35.5

11.1

8.9

23.2

23.5

9.6

25.8

SANKI REPORT 2022

Key Initiative 1

Increase orders for standard conveyors

Key Initiative 2 Expand presence in the automation and	labor-saving market and logistics market
Key Initiative 3 Establish a network of maintenance and	servicing businesses

26.0

Forecast

38

Machinery
Systems
Business

12.0

2017 2018 2019 2020 2021 2022 (FY)
Machinery
Systems Business

Key Initiatives of the Medium-Term Management Plan “Century 2025” Phase 3

Environmental
Systems Business

Environmental
Systems
Business

Reverse sorter ™

Major Development and Projects Delivered
Transportation industry (delivered March 2022)
E-commerce industry (delivered December 2021)

Plants & Machinery Systems Business

The Plants & Machinery Systems Business supports social infrastructure by providing
unique solutions in the two business domains of Machinery Systems and Environmental
Systems. In the former, we focus our knowledge and expertise on the use of newtechnologies, such as robotics, to meet the needs for automation and labor-saving in theface of a declining population through monozukuri (manufacturing). Meanwhile, in theEnvironmental Systems Business, we are constructing and operating water treatment andwaste treatment facilities and developing technologies for pursuing energy conservationand energy creation that contribute to carbon neutrality. While all of these are highly
visible public projects directly related to sustainability and are, in a sense, very rewarding,they also present never-ending challenges. We will continue to contribute to the creationof a sustainable society through a relentless pursuit of what we see the future will require.

Both net sales and profit rose because of a recovery in
manufacturing-related orders and net sales, which had
previously stagnated due to the COVID-19 pandemic.
Steady sales expansion of hybrid facilities contributed to
an increase in orders related to secondary batteries andmedical and pharmaceutical facilities.
Enjoyed strong sales of reverse sorters TM, a space-saving
vertical sorting devices developed for the logistics
market.
Developed automated sorting systems that use transport
robots and expanded our lineup of sorting systems.
Enhanced workability and productivity at the Yamato
Product Center by strengthening the manufacturing andproduction system for standard conveyors.
Boosted productivity and reduced costs at the Yamato
Product Center by improving and bolstering the
production management system.

Growth Strategies and Sustainability Management

Continuously Supporting Social Infrastructure to
Provide Solutions for Social Issues

Status of Business Operations and Future Outlook toward Achieving Phase 3
Strengthen Sales Capabilities to Increase Orders forStandard Conveyors
To strengthen our sales capabilities for standard conveyors,
we will forge closer relationships with distributors bypromoting networking to facilitate timely information
sharing. We will also strive to increase orders for standard
conveyors by utilizing new technologies such as video and
3D CAD in our sales materials as well as by reviewing our
product lineup and improving cost competitiveness.
Expand Products and Services to Meet Automation andLabor-Saving Needs
To meet the needs for automation and labor-saving
in logistics and other markets, we will promote thedevelopment of sales channels and sales expansion of
hybrid facilities and our new reverse sorters. In the foodindustry, we will launch a new conveyor with enhanced

hygiene features and expand sales of hybrid facilities tomeet automation needs. Furthermore, in collaboration
with the R&D Center, we will commercialize the operation
systems for transport robots and develop new products
for the logistics market as we also disseminate and gather
information by exhibiting at trade shows.
Establish a Maintenance and Servicing BusinessToward the establishment of an ICT-based facility predictive
maintenance system for post-delivery, for which demandis growing in logistics and other markets, we will promote
the development of partnerships, with due consideration
for regional characteristics, and cultivate and expand the
network of subcontractors. Consequently, this will improve
the quality of our maintenance and servicing services andexpand our service areas.

Key Initiative 1 Promote the energy conservation and energy	
creation businesses
Key Initiative 2 Expand the LCE business	Key Initiative 3 Expand business in overseas markets
	

SANKI REPORT 2022

39

Growth Strategies and Sustainability Management | Plants & Machinery Systems Business

Environmental Systems Business

Machinery
Systems
Business

Contributing to Work Style Reform in the Transportation Industry

Opti Sorter for Labor Savings and Efficiency in Home Delivery
Operations

Major Results for Fiscal 2021

*Design Build Operate is a process through which the design, building, operation, andmaintenance of a project is awarded to a private enterprise as a bulk order.

Air diffuser at the east sewage treatment plant in Hachinohe City

Major Projects
Okubo Water Purification Plant, upgrade work for the Seibu
system 2B flocculator
Minami Gamo Purification Center No. 4 Sludge Incineration
Facility Construction in Sendai City
East sewage treatment plant in Hachinohe City, mechanicalconstruction work for the extension of a water treatment facility
Ishikawa Local Living Environment Facility Association Waste
Disposal Facility Basic Equipment Improvement ProjectStatus of Business Operations and Future Outlook toward Achieving Phase 3
Promote the energy conservation and energy creation
businesses
As we expect energy conservation needs to continue as
demand for decarbonization grows, we will strive to expand
sales of energy-saving products, centered on strategic items
such as the SANDEC G3 decanter centrifuge, AEROWING
II ultra-fine bubble air diffuser, and the turbo-charged
fluidized bed incineration systems.
We will also actively engage in sales to win the nextorders in the energy creation business, in fields such as
woody biomass gasification power generation and turbocharged fluidized bed incinerators with a binary cycle
power generation system, where we have recently made afull-scale entry.
Further Promote and Expand the LCE* BusinessWe will stabilize projects in which we already engage inmaintenance and management and gain operational

expertise for the future expansion of the LCE business. In
addition, we will work on the establishment of a frameworkfor next-generation investment for securing long-term
earnings in the waste treatment business.
Develop Overseas Markets for Water Treatment
Facilities
To develop overseas markets for water treatment facilities,
AQUACONSULT Anlagenbau GmbH, a Group company
based in Austria, will strive to expand sales of strategic
products such as the AEROWING, an energy-saving ultrafine bubble air diffuser, mainly in Europe and the Middle
East. Meanwhile, in Southeast Asian countries, we intend
to develop businesses related to improving the water
environment by utilizing our proprietary technologies, suchas a drainage treatment unit based on the DHS method,from our foothold in Thailand, where we maintain a base ofoperations.

*Life Cycle Engineering is a business concept of the Sanki Engineering Group. Throughout the life cycle of a building, we provide services from new construction, repair, and maintenance torenewal and reconstruction.

40

SANKI REPORT 2022

◦Capable of sorting parcels in sizes 60 to 160 (L+H+W) in 80 directions◦Provides a simple mechanism for saving space

The domestic transportation industry has been promoting
more thorough efforts to reduce labor and improve efficiency
at logistics sites to meet the recent rapidly growing demandfor e-commerce and other services under its work style reform
efforts.
The Opti Sorter, delivered in September 2021 to a new
distribution center for the transportation industry, is aninnovative sorting device developed by a Dutch manufacturer.
It is capable of sorting parcels in sizes 60 to 160 (L+H+W),
the core items handled by our customers, in 80 directions,and its unique push-tray mechanism allows for the reliablesorting of a wide variety of parcels without any loss in quality.
Furthermore, its simple mechanism ensures significant spacesavings and achieves unprecedented operational efficiency.
In fiscal 2022, Sanki Engineering will establish a collaborative

relationship with the manufacturer to further promote theintroduction of this product.

Plants & Machinery Systems Business

Received orders for large-scale construction work
for waste treatment facilities and maintenance andmanagement operations due to ongoing needs arisingfrom the Japanese government’s national resilience
policy. Net sales and profit increased due to progress inconstruction work carried over from the beginning of the
fiscal year.
Enjoyed steady progress in the maintenance,
management, and operation of the PFI project Okubo
Water Purification Plant and the DBO* projects Clean Hill
Tenzan and Sendai Clean Center, in collaboration withGroup companies.
Received orders for energy-saving aeration systems at
two large water treatment facilities in Denmark.
Acquired a certification of technology verification for
global use from the Japan Sewage Works Agency andachieved progress toward contributing to addressing
social issues through water treatment in Thailand.

Value delivered by
Sanki Engineering

Growth Strategies and Sustainability Management

Focus

Newly delivered Opti Sorter conveyance system

Focus
Environmental
Systems
Business

Contributing to Significant Energy Savings in the City of Copenhagen

Received an Order for Energy-Saving Air Diffusers for Large
Water Treatment Plants in Denmark

Value delivered by
Sanki Engineering◦High oxygen transfer efficiency due to ultra-fine bubbles◦Reduced power consumption at drainage treatment plants, resulting in energy savings◦Flexible layout according to the tank shape◦Long-term use possible

In February 2022, AQUACONSULT, a Group company, received
an order for 9,660 energy-saving air diffusers for use indrainage treatment at the Lynetten and Damhusaen water
treatment plants (both in Copenhagen) operated by BIOFOS
in Denmark.
The latest order was awarded in recognition of theperformance of 1,600 AQUACONSULT air diffusers that havebeen in operation since 2015 at the Avedore water treatment
plant in southern Copenhagen, which have lowered power
consumption by approximately 2 million kWh per year, a 40%
reduction compared to existing diffusers.
All units are scheduled to be delivered between June
2022 and May 2025, so that energy-saving air diffusers
manufactured by AQUACONSULT will be used at water

treatment facilities throughout Copenhagen to further reduce
environmental impact by reducing power consumption.

Lynetten water treatment plant

SANKI REPORT 2022

41

Growth Strategies and Sustainability Management

Foundation of Sustainability Management

Real Estate Business

Sustainability Management
In accordance with its management philosophy of “creating comfortable environments
through engineering and widely contributing to social development,” the SankiEngineering Group formulated its Sustainability Policy and laid out its “Vision for 2050—
Sanki, The Enduring Company of Choice.” We are promoting sustainability management by contributing to social
issues through technology and continuing our management activities. We have also identified materiality issues of
the Sanki Engineering Group and have set KGIs and KPIs under our Medium-Term Management Plan “Century2025”
Phase 3 (FY2022–2025) to assess the progress of our initiatives. Through these efforts, we intend to contribute to
the creation of a sustainable society and achieve sustainable growth for the Group.

Adding Higher Value toReal Estate by Applying Our
Technologies and Expertise▍Policies and Guidelines on Sustainability

P.20

Management Philosophy

Promoting
Sustainability
Management

Sustainability Policy

Net Sales
Composition
Ratio

Net Sales for
Fiscal 2021

1%

2.4

billion yen

Net Sales (Billions of Yen)
2.2
1.7

2.3

2.4

2.4

1.9

2017 2018 2019 2020 2021 2022 (FY)Forecast

Basic Strategies for Fiscal 2022

1. Effective use of portfolio assets
2. 
Maintenance and managementof portfolio assets
3. 
Raise revenues from building
stock-based business byaccumulating leasing operations

Human Rights
PolicyEnvironmental
PolicyProcurement
PolicyNeed to improve office environments using advanced technologies such as AI
and IoT
Growing need to conserve energy and create comfortable environments
Falling demand for offices and prolonged period of vacancies due to changing
work styles and spread of teleworking

Sanki EngineeringGroup Materiality

Major Results for Fiscal 2021
Net sales and profit increased due to growth in rental income following a risein the occupancy rate, mainly at a portfolio asset in Yamato City, Kanagawa
Prefecture (Sanki Yamato Site).
Making effective use of Sanki Techno Park, including the Sanki Techno Centerand Sanki Yamato Building, we centralized their management, including facility
maintenance, security, and cleaning.
Made a capital investment for renewing escalators and LED lighting at our
Molive shopping mall building in Moriyama City, Shiga Prefecture, to promotefacility maintenance and energy conservation.

Policy and Outlook for Fiscal 2022
In fiscal 2022, we will continue to seek sustainable development for the Real
Estate Business by continuously applying Sanki Engineering’s technologies andexpertise to the maintenance and management of portfolio assets while further
striving to achieve operational efficiency.
In addition, we will keep enhancing efficiency and convenience regarding
our Sanki Techno Park facility through a centralized management system and, inorder to maintain and improve the occupancy rate (real estate tenants), we willhold discussions with current tenants and promote activities aimed at attracting
new ones.

System for Promoting Sustainability
In November 2021, the Sustainability Committee, chaired by the president andcomposed of directors, was established as an organizational entity to deliberate anddecide on key issues and measures related to sustainability. Important agenda items are
submitted to the directors for discussion, reporting, and decision-making.
In fiscal 2021, the committee met twice to discuss the formulation of the
Sustainability Policy, Materiality, and Sanki’s Carbon-Neutral Declaration. Theirdeliberations were then submitted to the Board of Directors, which made a final
decision.
In addition, a Sustainability Promotion Council, consisting of personnel in chargeof sustainability from each division, was established as a subordinate body of the
Sustainability Committee to examine and disseminate measures and track progress.
We address sustainability issues throughout the entire value chain in accordancewith this promotion system.
▍Sustainability
Promotion System

Board of Directors
Discussion,
repor ting

Super vision

Management Meeting
Discussion,
repor ting

Sustainability
Committee

Leadership,super vision

Chairperson : President and Representative Director
Members: Directors and persons nominated by the chairperson
Secretariat : Sustainability Promotion Department
Repor ting

Sustainability Committee
Meets twice a year to decide on
important issues and measures torealize sustainable management.
FY2021 Agenda
・F ormulate Sustainability Policy
and Materiality
・S et targets for greenhousegas reduction (Sanki’s CarbonNeutral Declaration)

Monitoring, guidance

Members : Sustainability Promoters from each division
Secretariat : Sustainability Promotion Department
Information sharing, collaboration

Sections, centers, headquarters, business division, business departments,
branches and branch offices, Group companies

SANKI REPORT 2022

P.24

Opportunities and Risks in the Business Environment

Sustainability
Promotion Council

42

Sanki Group Codeof Conduct andAction Guidelines

Real Estate Business / Sustainability Management

Sustainability-Related
Policies of the SankiEngineering Group

Foundation of Sustainability Management

Basic Principle

Sustainability Promotion
CouncilMeets twice a year to takemeasures to ensure awareness ofsustainability-related policies andkeeps track of progress.

SANKI REPORT 2022

43

Foundation of Sustainability Management

Sanki Engineering Group Value Chain
Foundation of Sustainability Management

The Sanki Engineering Group is engaged in the life cycle engineering (LCE) business, in which we handle the entire processfrom facility planning and design to procurement, construction, operational management, maintenance and inspection, andrenovations and renewal. We seek to generate diverse benefits that meet stakeholder expectations by addressing opportunities
and risks in the context of sustainability management across the value chain of our business activities.
Social Issues
Declining population, falling birthrates,
and aging population

Climate change

Upstream● Shift to a decarbonized society ● Limited resources● Resource circulation ● Waste issues

Facility Design

Subcontractors● Labor shortage

Delivery● Human rights risks● Fair procurement

Work style reform

Aging infrastructure● Supply chain risks● Safety first

Construction

Manufacturers, Business Partners● Quality assurance

Spread of COVID-19● Ensuring information security

Construction

Subcontractors

Subcontractors

We participate in the planning and design stages of wideranging projects involving building and industrial HVAC
systems, water supply and drainage systems, electricalsystems, material handling and conveyance systems, andwater treatment and waste treatment facilities in orderto provide proposals offering the ideal combination of
comfort and reduced environmental impact. In addition,
we proactively develop and introduce new technologies
for meeting customer needs, including Open Lab
initiatives that encourage active joint research inside andoutside the Group.

We ensure the stable procurement of highly specializedmaterials, equipment, and services required inconstruction through a sound and secure supply chain.
We have constructed a Procurement Web to strengthen
our relationships with business partners by sharing
information, seeking to raise operational efficiency,
and shorten lead times for both Sanki Engineering andits partners while also reducing costs through lower
purchasing costs and digitalization.

Construction
and Construction
Management

SANKI REPORT 2022

By taking over the operation, management, maintenance,
and inspection of facilities designed and constructed by SankiEngineering, such as office buildings, factories, schools, hospitals,
waste treatment plants, and water treatment plants, we ensurestable operation of customer facilities and efficient preventive
maintenance, extend the operational life of facilities, and reducerunning costs. For Sanki Engineering, this provides an opportunity
to promote our LCE business by providing us with a source ofstable, long-term profit and enabling us to offer renovation andrenewal proposals at the optimal timing.

● Promotion of health and safety activities● Fostering of human resources and enhancementof technology● Initiatives for preventing problems and complaints● Response to introducing BIM● Proposal for disaster prevention and mitigation

facilities● Proposal and design for meeting the demand for

HVAC and clean rooms that prevent infections● Fostering of human resources and enhancementof technology● Promotion of work style reform● Promotion of diversity● Promotion of green procurement● Initiatives for CSR procurement● Fair, equal, and transparent business
relationships● Response to introducing BIM● Promotion of green procurement● Initiatives for CSR procurement● Promotion of health and safety activities● Support for stabilizing the business of subcontractors●F ostering of stable relationships of trust with

subcontractors● Initiatives for preventing problems and complaints● Response to human rights ● Active proposals for
issuesimproving work sites● Promotion of health and● Development andintroduction ofsafety activities●F ostering of human resources construction-related
and enhancement of
automation and laborsaving technologies
technology● Promotion of work style● Initiatives for preventing
problems and complaints
reform● Response to introducing BIM ● Proper disposal andreduction of waste● Promotion of diversity● Compliance with
● Improved productivity
based on systematic
environmental regulations
division of labor●D evelopment and introduction of construction-related
automation and labor-saving technologies● Initiatives for preventing problems and complaints● Response to human rights issues

Upstream

Upstream● Promotion of health and safety activities● Response to increased demand for data centers andopen offices due to promotion of teleworking● Promotion of the SANKI YOU Eco Contribution
Point system● Proposals and design for reducing
environmental impact● Proposal and design for energy creation facilities●A ppropriate management of customer
information, protection of personal information

business partners● Promotion of green procurement● Initiatives for CSR procurement● Response to material shortages and delivery delays

Sanki Engineering● Promotion of diversity● Fostering of stable relationships of trust with

● Response to human rights issues● Response to human rights issues● Promotion of work style reform

Sanki Engineering

Sanki Engineering● Response to human rights issues● Initiatives for diversifying the supply chain

Downstream

complaints● Response to human rights issues

Upstream● Promotion of health and safety activities● Initiatives for preventing problems andCustomers● Promotion of health and safety activities● Support for stabilizing the business of subcontractors● Fostering of stable relationships of trust with

subcontractors● Initiatives for preventing problems and complaints● Response to human rights

Sanki Engineering● Response to human rights issues

Downstream

Upstream

Use, Renovation, and Renewal

Downstream

Maximize Opportunities and Minimize Risks

44

Maintenance

We have developed a nationwide construction management
system, drawing upon our ample experience and advanced
technical skills, and implement high-quality construction
operations in collaboration with as many as 920 companies thatmake up our Subcontractor Group. In addition to strengthening
internal controls and systems for supporting site operations,we aggressively adopt new technologies and improve
construction methods to advance automation and save labor in
the construction process, and we meet diverse customer needs
by providing customized construction options that effectively
balance quality and cost.

Downstream

Procurement andOrdering

issues● Promotion of health andsafety activities● Fostering of humanresources and enhancementof technology● Promotion of work stylereform● Promotion of diversity● Initiatives for preventing

problems and complaints● Proper disposal andreduction of waste● Compliance withenvironmental
regulations● Response to introducing
BIM● Response to the need for contact-free means of humaninteraction

Downstream

Sanki Engineering

Customers
Construction
companies
Design offices

Facility Design

Sanki Engineering Group Value Chain

Planning● Realization of optimal operational management thatsaves energy● Reduced environmental impact based on generatingenergy and the recycling and reuse of resources● Initiatives for preventing problems and complaints● Proper disposal and reduction of waste● Compliance with environmental regulations● Realization of safe, secure, and comfortable environments

SANKI REPORT 2022

45

Foundation of Sustainability Management

Stakeholder Engagement

Disseminating the Idea of Sustainability across the GroupWe are disseminating the concept of sustainability to promote sustainable management, and our guidelines summarizing

with various stakeholders and reflect the demands of society in our business activities while promoting our sustainability

the Sanki Engineering Group’s approach to sustainability have been distributed to all employees. We also regularly provide

initiatives throughout the entire value chain.

information through in-house newsletters and other means to foster awareness of the need to resolve social issues.

▍Sanki Engineering Group’s Main Stakeholders
Nature of Engagement

Building owners, realestate developers,
manufacturers,
financial andinsurance companies,
department stores,
hospitals, schools,
research institutes, etc.

We are aware that our duty is
to meet customer needs anddo our utmost to resolve social
issues by drawing on our diverse
component technologies related
to social infrastructure.

● R esolve issues for customers and●D ialogue through sales● Provide construction and● Websites and showrooms

Number ofshareholders:approx. 14,524(as of March 31, 2022)

Gaining the understanding
and trust of shareholders
and investors is essential fordeveloping a sustainablebusiness, and we place astrong emphasis on disclosing
appropriate information andengaging in communication.

● E nhance corporate value

Our business partners support
our businesses and are key allies
in achieving mutual growthand development. We consider
it our mission to conduct fairbusiness transactions and foster
relationships of trust.

● B uild fair, equal, and transparent● D ialogue through daily● Foster relationships of trust and● Collaboration and

Employees

Areas aroundconstruction sites andoffices

Local
Communities

Central government
ministries andagencies, municipal
governments, etc.

Government andAdministrative
Authorities

46

SANKI REPORT 2022

Our business activities are
directly connected to the local
community. We intend to directly
address issues faced by local
communities and contribute to
the development of these places
through ongoing dialogue as agood corporate citizen.
We believe that our partnerships
with administrative bodies are
essential for serving society’s
needs as we take on public works
related to social infrastructure.

●P romote open innovation● B uild equal and fair relationships● I ndustry-academic

collaboration●D ialogue at the Open Lab● I nterviews with

● Cultivate human resources,● Various reporting anddevelop capabilities, and promote
diversity● E nsure occupational safety
and create good working
environments● R espect human rights

supervisors and training

consulting channels● L abor-Management
Council● Website, intranet● I n-house surveys● D evelop social infrastructure●B ranch and branch officelocal communities and theenvironment● D isclose information● B riefings related to● Pay due consideration to●C omply with laws, regulations,and administrative guidance●P ay taxes●D evelop social infrastructure●C ontribute to local disasterprevention

Environment

support through the
Subcontractor Group● Corporate Ethics Hotline

counters

construction work

● D ialogue throughactivities that contributeto the local community● Various notifications● B ranch and branch officecounters● Briefings and reports

related to constructionwork● D ialogue throughindustry associations

Evaluation of results against FY2021 goals◎：Goal attained ◯：Some progress made △：Goal unattained
FY2021 Results

Evaluation• CO2 reduction proposals under the SANKI YOU EcoContribution Point system (consolidated)• O rders received: 263/number of proposals: 431(FY2020: 214 orders received)

Provide products andservices to help reduce
the CO2 emissions ofcustomers

Target
CO2 reduction proposals under the SANKI YOU EcoContribution Point system (consolidated)
More than 300 proposals

Reduce CO2 in businessactivities

TargetCO2 emissions (actual results of our businessactivities)(non-consolidated)
1% lower than in previous fiscal year

• Scopes 1, 2 (consolidated): 7,849 t-CO2 (FY2020: 8,061 t-CO₂)◎

Reduce the numberof problems andcomplaints during
construction

TargetReduction rate for number of problems and complaints
during construction (consolidated) Reduce by 5% yearon-year through divisional collaboration• R eduction rate for the number of problems and complaints
during construction (consolidated): down 25% from FY2020(FY2020: down 30.0% from FY2019)◎

Introduce new laborsaving construction
technology

TargetNumber of sites introducing new labor-saving
construction technologies
Two sites per year

• N umber of sites introducing new labor-saving construction
technologies: 5 sites (FY2020: 6 sites)◎

Reduce the number ofaccidents

TargetReduce by 20% year-on-year through cooperation
among divisions (Sanki Engineering Co., Ltd. andbusiness partners)• N umber of accidents: (Sanki Engineering Co., Ltd. andbusiness partners): 3 cases (FY2020: 3 cases)△

Implement accident
prevention measures
for subcontractors

TargetVisits to subcontractors
Ratio of accidents involving inexperienced workers• R atio of accidents: involving inexperienced workers: 26%(FY2020: 37%)○

Continue health andsafety training

TargetPromote health and safety training sessions for
employees and subcontractors• Promote training and guidance on topics such as the use of ICT
Health and Safety Training for employees andsubcontractors: 183 sessions (FY2020: 201 sessions)○

Further enhanceprocurement efficiency

TargetDigitize operations• Percentage of digitized operations (non-consolidated): 95%(FY2020: 91%)◎

Exchange opinionswith business partners

TargetExchange opinions with business partners(twice a year)• E xchange of opinions• N umber of companies we exchanged opinions with in
FY2021: 30 companies (twice a year)(FY2020: Suspended dueto the COVID-19 pandemic)◎

Strengthen cooperation
through the
Subcontractor Group

TargetExpand the scope of participation in the Sanki
Health and Safety Cooperative Association• N umber of participants in the Sanki Health and Safety
Cooperative Association 33 in July, 33 in December (FY2020:
11 in July; 30 in December)○

Improve internal
communication

TargetStrengthen the system for gathering employee feedback• O pinion exchange session between new employees and thepresident (new employee CCU)
• Workplace surveys◎

Balance work and life
through the Smile
Project

TargetMonitor and take action according to the situation• Average monthly overtime work per person• Rate of paid leave taken per person• R ate of paid leave taken per person (consolidated): 55.6%(FY2020: 55.3%)○• Average monthly overtime work per person (consolidated):
23.9 hours (FY2020: 29.0 hours)○

Contribute to regional
disaster prevention

TargetTotal number of regional disaster prevention activities• Carried out activities under the large-scale disaster agreement
between Yamato City and the Yamato Engineering Center◎

Support culturalactivities for the next
generation

TargetSupport cultural activities• H eld the Third “Kizuna” Tsugaru Shamisen Concert topromote reconstruction of areas affected by the Great East
Japan Earthquake◎

Contribute toconservation of thelocal environment

TargetParticipate in environmental beautification activities• Conducted activities at 35 sites (consolidated)(FY2020: 33 sites)◎

Hold more IR meetings

Target15 more than in FY2018• IR meetings: 35 sessions (FY2020: 40 sessions)△

Provide consistent,
steady returns toshareholders

TargetTotal return ratio: 70% or more

• Total return ratio: 95.7% (FY2020: 97.3%)◎

procurement activities● E nsure equal opportunity andfair evaluation

Quality Control

meeting, shareholder
newsletters● R esults briefings, oneon-one IR interviews, andresponse to inquiries● I R website, Sanki Report● S hareholder surveys

Occupational Healthand Safety

collaboration● E nsure occupational safety
and create good working
environments● R espect human rights● G eneral shareholders

Supply Chain

Our employees constitute thevery foundation of our businessactivities. We acknowledge
that the Group derives its
competence from the individual
abilities of its diverse humanresources characterized by the
Sanki Spirit.

business relationships

and exchange views

Human
Resources

Number of employees
Consolidated: 2,607
Non-consolidated:
2,096(as of March 31, 2022)

and appropriately allocate
management resources● Conduct timely and adequate
disclosure of corporate
information● E xhibit at trade shows

Local Communities

Partners

Acquiring excellent knowledge
from external bodies suchas universities and research
institutes is indispensable forfully applying our component
technologies and also results in
the resolution of social issues.

● Provide a stable return of profits

activities and meetings

Dialogue with
Shareholders
and Investors

Universities,
research institutes,
architectural design
offices, etc.

technical services with highadded value● E nhance customer satisfactionin terms of quality, delivery, andcost

FY2021 Goals

SocialSubcontractors,
general contractors,
material/machinery
manufacturers,
building maintenancecompanies, etc.

society at large

Results of Sustainability Initiatives for FY2021◎

 ontribution to reduction: 35,848 t-CO2
C(FY2020: 28,430 t-CO2)

SANKI REPORT 2022

Sustainability Management

Outline of Stakeholders

Shareholders
and Investors

Business
Partners

Major Methods ofEngagement

Governance

Customers

Main Responsibilities of the SankiEngineering Group

Foundation of Sustainability Management

The Sanki Engineering Group engages with a wide range of stakeholders in the course of its business activities. We communicate

47

Foundation of Sustainability Management | Environment

E

S

G

Environment

SocialGovernance

Environment
Addressing Climate Change toward a Decarbonized Society
Established April 1, 2022

The Sanki Engineering Group strives to conserve the global environment in all our business activities, including the
supply chain, with the intention of realizing a decarbonized society, recycling oriented society, and society in harmony
with nature.
1. We will promote energy-saving and the use of renewable energy in all our business with a view toward carbon neutrality.
2. We will strongly promote the SANKI YOU Eco Contribution Point system, whereby we conduct environmental conservation activities
according to the amount of CO2 emissions reduction from our facilities and contribute to decarbonization of our clients.
3. We will aim to realize a recycling oriented society by thoroughly controlling the generation of waste, recycling resources, and proper disposalof waste.
4. As we recognize that biodiversity is an important foundation for a sustainable society, we aim to realize a society in which nature and humans
can coexist in harmony by working toward preserving biodiversity.
5. We will disclose information on conservation of the global environment in a timely and appropriate manner.
6. We will continue to consider the impact of our business activities on climate change and biodiversity, prevent environmental pollution,comply with environment-related laws and regulations, and actively promote global environmental conservation activities.

⨋ Environmental Management System

Under our system for implementing environmental management, headed by the president,
each division reports on the status of its activities, and decisions on action plans are madeduring ISO Promotion Meetings and Company-wide QMS and EMS secretariat meetings.

P.57
Quality and Environmental
Management System⨋ Initiatives for Environmental Management

We pursue our activities by having each section set environmental goals aligned with
their respective operations. In fiscal 2021, we began using the Environmental Aspects
Assessment List at our overseas subsidiaries to expand the scope of application. No issues
were reported regarding noise, dust, or odor at construction sites.
In May 2019, Sanki Engineering Co., Ltd. and Group company Sanki Chemical
Engineering & Construction Co., Ltd. were found to have unlawfully altered the measured
values at two incineration facilities constructed by Sanki Engineering. We addressed thisby providing an explanation at a meeting with local residents organized by the relevant
regulatory body. Furthermore, the ISO 9001 certification of the Environmental Systems
Administration Division at Sanki Engineering and the ISO 14001 certification of Sanki
Chemical Engineering & Construction were temporarily suspended from September to
October 2019. In March 2020, we implemented corrective work, verified the performanceof the relevant facility, and received approval from a third-party institution and the ownerof the facility. We have since maintained appropriate management for the operationof these facilities. The Sanki Engineering Group has sought to prevent a recurrence bycontinuously bolstering its management system. This includes educating employees oncompliance and environmental management and conducting internal audits.

⨋ Assessment and Response to Environmental Risks and Opportunities

We use the JOB Environmental Aspects Assessment List consisting of 10 aspects and around
60 items to identify environmental issues that are unique to each construction site, bylaws
governing site location, regional agreements, and more. Prior to the start of construction,
we seek appropriate action by conducting an environmental risk assessment for eachproject to address differences in the type, scope, and regulatory requirements with respect
to environmental risks, depending on the project type, such as medical institutions andcommercial facilities, and the surrounding environment, community, and nature of the work.

48

SANKI REPORT 2022

We endorsed the recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD) in November 2021 and disclose information on risks and opportunities
related to climate change in accordance with the disclosure framework. With theinformation disclosed at this time, we will do our utmost to achieve carbon neutrality andrealize a decarbonized society.

⨋Governance

In November 2021, the Sanki Engineering Group established the Sustainability Committee,
chaired by the president and composed of members of the Board of Directors, to address
climate change and sustainability issues in general. The Sustainability Committee meets
twice a year to discuss and decide on key issues and actions for realizing sustainability
management. In fiscal 2021, it discussed the Sustainability Policy, materiality, and Sanki’s
Carbon Neutral Declaration, which were submitted to the Board of Directors for decision.
The Sustainability Promotion Council, established as a subordinate body of the committee
and composed of persons in charge of the related practical matters in each department,
also discusses and promotes decarbonization throughout the Group. In addition, wemanage risks associated with climate change, which we recognize as impacting ourbusiness, under the Risk Management Committee, which consists of representatives fromall departments of the Group, and the Climate Change Risk Subcommittee, a subordinatebody of the Risk Management Committee.
Each committee reports on the content of their deliberations and decisions to theManagement Meeting, and the Board of Directors conducts an audit of the status ofinitiatives for addressing the climate-related issues reported to the Management Meeting.

Environment

Environmental Management System
環境マネジメントシステム⨋ Information Disclosure Based on TCFD Recommendations

Foundation of Sustainability Management

SANKI Engineering Group Environmental Policy

P.43
Sustainability Promotion System⨋ Risk Management

P.57
Initiatives for Ensuring Quality

Environmental Aspects Assessed
under the JOB Environmental
Aspects Assessment List
1. Use of resources and energy
2. Reduction and proper disposalof 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

The Risk Management Committee, which oversees business-related risks, identifies andcategorizes the risks, determines the subcommittees in charge and content of control
plans, assesses the risks by quantifying their impact and frequency insofar as possible,
formulates and implements priorities and response policies, and conducts periodic
reviews.
With regard to climate-related risks, the Climate Change Risk Subcommittee examines
the assessments and control plans and reports to the Risk Management Committee. The
decided measures are submitted to the Sustainability Committee, Management Meeting,and Board of Directors for deliberation and further decision, depending on the relative
importance of the assessed risk, and are then implemented by all the departments of theGroup in cooperation with the Sustainability Promotion Council. Measures included in
the Medium-Term Management Plan are incorporated into the execution plans of eachdivision to manage their progress.

P.85
Framework of
the Risk Management System⨋ Scenario Analysis

Scenario analysis is conducted to gain an understanding of the medium and long-term
impact of climate change on business. We analyzed a scenario in which it is expectedthat the average global temperature increase will be kept down to less than 2 degrees
C higher than the level of the days of the industrial revolution and another scenario in
which the temperature rises by approximately 4 degrees C, in terms of relations to policies
and market trends, and also analyzed physical changes engendered by events such as
disasters.For each scenario, causes of group-wide risks and opportunities have been
identified and their degree of impact on business verified and assessed in three stages:
High, medium and low. “Climate-related policies and legislation” and “rising temperatures
and abnormal climate” have been identified as high risks to business and “markets,
SANKI REPORT 2022

49

Foundation of Sustainability Management | Environment

Designated Scenarios

Less than 2°C scenario
Stringent measures against climatechange are taken, and the temperature
increase in 2100 is limited to less than 2°C
from the level of the Industrial Revolution

Reference Scenarios
IEA*1: Sustainable Development
Scenario (SDS)IPCC*2: Representative
Concentration Pathways(RCP2.6)

4°C scenario
Stringent measures against climatechange are not taken, and the temperature
increase in 2100 is around 4°C from thelevel of the Industrial Revolution

IEA: Stated Policies Scenario(STEPS)
IPCC: Representative
Concentration Pathways(RCP8.5)

FY2050

Scopes 1, 2

FY202040% reduction

Carbonneutrality

Carbonneutrality

Scope 3

FY202010% reduction―

Carbonneutrality

FY2018–FY2020(average)

30% increase――

Physical Risks

Climate-related policies and regulations

Scope/Category

Applicable Activities

Rise in temperatures and extreme weather events

FY2020emissions(t-CO2)

FY2021*emissions(t-CO2)

Possibleevent

Scope 1
(direct emissions)

Direct emissions from businesses owned
or controlled by the Company

1,658

1,722

ImpactMajor
Well below 2°C scenario        4°Cscenario

Minor
Well below 2°C scenario        4°Cscenario

Scope 2 (indirect emissions
from purchased energy)

Indirect emissions caused by use ofpurchased electricity or heat

6,403

6,127

Timeline

Medium to long term

Medium to long term

Risks andopportunities
for the SankiEngineeringGroup◦Surge in construction costs due to growing demand for suppliers to
introduce carbon neutral technologies◦Rise in the cost of purchasing environmental value for realizing
carbon neutrality, including a shift to green electricity andrenewable energy certificates◦Decline in corporate reputation and brand due to insufficient
information disclosure◦Increased risk of occupational accidents, such as heat stroke◦Risk of suspensions or delays in construction due to extreme
weather events◦Delays in procurement of materials and equipment

6,161,990

5,005,392◦Strengthen procurement capabilities based on electronic
procurement systems and centralized purchasing◦E xtend capital investment for advancing carbon neutrality at SankiEngineering◦Promote activities for reducing emissions across the supply chain◦Proactively disclose information◦Enhance technology for preventing occupational accidents andproblems during construction◦Develop alternative robotic technologies for the construction site toimprove the labor environment◦Construct and operate BCMS for maintaining effective BCPs
◦Utilize DX to balance improvements in quality and productivity with
reduced work hours◦Continuation of the Smile Project (work style reforms), led by top
management◦Promote application of BIM

Minor

Markets, products, and services

Major

Possible events

Expansion in demand for technologies that strengthen resilience

ImpactMajor
Well below 2°C scenario        4°Cscenario Medium

Major
Well below 2°C scenario        4°Cscenario

Timeline

Short to medium term

Medium to long term

Risks andopportunities
for the SankiEngineeringGroup◦Rise in demand for ZEB projects and energy-saving projects led by
growing need for energy conservation◦Rise in demand for renewable energy business・Increase in demand for renewal projects
・Increase in demand for resilience-related services◦Promote development of new technologies for realizing adecarbonized society◦Strengthen the SANKI YOU Eco Contribution Point system, which
combines reductions in CO2 emissions by customers basedon energy-saving proposals with donations to environmental
preservation activities◦Promote open innovation (collaboration with other businesssectors, universities, and venture companies)◦Develop energy creation businesses such as renewable power
generation◦E xtend growth investments for the next generation, including
decarbonization technologies (energy conservation, energy
creation, and others)◦Further development of automation and labor-saving markets◦Promote application of BIM◦Strengthen the total integration business of building ICT◦Promote our LCE Business (stock-based business)◦E xpand onsite information and communication infrastructurebusiness◦E xpand consulting service offerings◦Strengthen system to quickly respond to energy-saving
technology and customer needs

SANKI REPORT 2022

SocialGovernance

Scope 3(other indirect emissions)Category 1

Emissions from the manufacturing ofproducts and services purchased

344,460

345,217Category 2

Emissions from the construction,
manufacturing, and transportation ofcapital goods purchased

7,419

5,518

Category 3

Emissions from the extraction, production,and transportation of fuels, electricity, andheat purchased

1,006

1,336

Category 4

Emissions from the distribution andtransportation of products purchased to
the Company

819

1,123

Category 5

Emissions from the transportation,
disposal, and treatment of waste
generated by business activities

1,481

1,744

Category 6

Emissions from the transportation of
employees for business-related activities

332

401

Category 7

Emissions from transportation used for
employee commuting

658

965

Category 11

Emissions from the use of goods andservices sold5,800,139

4,643,385

Category 12

Emissions from the waste disposal andtreatment of products sold

1,483

1,381

Category 13

Emissions from the energy used by leased
assets

4,193

4,322

6,170,051

5,013,241

P.30 Feature 1

Scope:Sanki Engineering Group* We have obtained third-party assurance for
the FY2021 results.
Note:
Categories 8, 9, 14, and 15 are not applicable.

Independent Third-Party
Assurance Reporthttps://www.sanki.co.jp/csr/environment/
tcfd/doc/assurance_report.pdf(Japanese only)

Resilience

Rise in demand related to energy-conservation and renewableenergyResponse

Environment

Environment

Risks

FY2030◦Greater impact of rising temperatures on working conditions◦Increased severity and frequency of extreme weather events

Category

Opportunities

FY2025◦Rise in construction costs due to carbon pricing◦Restrictions on business due to CO2 emissions regulation◦Heightened demand for disclosure of climate change-related
information

Response

50

Base Year

▍Greenhouse Gas Emissions
Transition Risks

Category▍List of Targets

Reductions throughthe SANKI YOU EcoContribution Point
system⨋ Risks and Opportunities

G⨋Indicators and Targets

In February 2022, we established the Sanki Carbon Neutral Declaration as a long-termgoal. We will address the climate change issue by focusing on reducing greenhouse gases
based on the following indicators.
Initiative*1 Acronym for International Energy Agency. This is an internationalorganization that covers overall energy policies under the auspices of theOECD (Organisation for Economic Co-operation and Development), a bodywith energy safety and security as its goal.
*2 Acronym for Intergovernmental Panel on Climate Change, an organization
established in 1988 by the World Meteorological Organization (WMO)and United Nations Environment Programme (UNEP) with the goal ofcomprehensive assessment of climate change, impact, adaptation andmitigation policies.

S

Foundation of Sustainability Management

products and services” and “resilience” as opportunities.
Policies to handle identified risks and opportunities
are incorporated into Phase 3 of the medium-term
management plan “Century 2025” and deployed andimplemented in the executive plans of each division.

E

Major

Total

SANKI REPORT 2022

51

Foundation of Sustainability Management | Environment⨋Initiatives for Emissions Reduction (Scope 1 and 2)▍Energy Consumption

(MWh)
FY2021

Energy consumption

22,474⨋Contribution to Reductions through Our Business Activities (Scope 3)▍R&D Expenditures Related to Environmental Preservation
624.5

610.5

⿟Sanki Techno Center•E coSearcher® real-time heatsource optimization system(proprietary technology)• s elFort® smart HVAC systemfor offices (proprietary
technology)

Independent Third-Party
Assurance Reporthttps://www.sanki.co.jp/csr/environment/
tcfd/doc/assurance_report.pdf(Japanese only)

SocialGovernance

FY2018(CO2 Reduction Unit: t-CO2)
FY2019NumbersCO2
reduction

Consolidated

411

Nonconsolidated

FY2020

NumbersCO2
reduction

50,072405

370

45,531

Consolidated

183

Nonconsolidated

163

FY2021

NumbersCO2
reduction

NumbersCO2
reduction

45,685379

68,810431

134,399377

44,756352

68,243

367

112,550

20,699181

27,624

214

28,430263

35,84816,608163

27,221200

28,296218

14,355

Proposals

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 CO2 emissions throughour contribution to ecology.

Orders received▍SANKI YOU Eco Contribution Point System

Customers
1. P ropose
energy-saving
solutions

Trans-Heat Container for delivering thermalenergy(Millions of Yen)
647.7

▍Proposals for CO2 Reduction and Outcomes•P eriloop thermal

Scope: Sanki Engineering Group* We have obtained third-party assurance.

Environment

over 19,000 trees planted.
Under the Medium-Term Management Plan “Century 2025” Phase 3, we aim tobolster this system as a measure for reducing Scope 3 emissions.
We will continue to actively develop proposals for reducing CO2 emissions andoffer an even greater contribution to environmental conservation activities.

⿟Yamato Product Center
stratification HVAC system(proprietary technology)•S olar photovoltaic panels

G

Environment

The Sanki Engineering Group seeks to help customers save and generate energy
to reduce CO2 emissions and cut lifecycle costs through its business activities byenhancing the functionality and comfort offered by the technologies and products ofeach of its businesses. In our LCE Business, we seek to reduce environmental impact
across the entire product lifecycle, from planning 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.
We will continue to expand business contributions to save and create energy, such as
biomass power generation plants, and pursue resource circulation through wastewater
treatment facilities and waste treatment facilities.

Energy-Saving Systems Installedat Sanki Engineering Facilities

S

Foundation of Sustainability Management

To reduce emissions at our plants, offices, and construction sites, we have beenthoroughly implementing energy conservation activities by effectively operating
facilities at each location. At the Sanki Techno Center and Yamato Product Center, wehave installed several energy-saving systems to reduce energy, including those that
apply our proprietary technologies. Sanki Techno Center has switched to electricity
derived from renewable power sources to meet its electricity needs since April 2022.
Looking ahead, we will consider installing solar photovoltaic panels and converting
Company vehicles to EVs.

E

 Propose using energy-saving equipment
to reduce CO2 emissions

2. P roposal
AdoptedSanki Engineering

3. C onvert each tonne of
reduced CO 2 to 100 yen

4. D onate to environmental
conservation groups

Environmental
conservation activity

690.5⨋ Developing Environmental Leaders

We encourage employees to acquire environment-related qualifications in response toregulatory changes.

424.8▍Number of Employees with Environment-Related Qualifications (as of April 1, 2022)
2017

2018

2019

2020

2021

（FY）

⨋ Registered ZEB Planner

Sanki Engineering is a registered ZEB Planner, which seeks to promote the widespread
introduction of ZEBs* 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 thecontact point for customers planning to adopt ZEB in construction projects and play
our part in developing a decarbonized society by supporting ZEB planning.

⨋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 and realizing a sustainable
society. Under the system, when we propose an energy-saving solution that reduces
CO2 emissions to a customer and that proposal is adopted, the amount of the achieved
emissions reduction is converted to Eco Contribution Points, which are used to support
environmental conservation activities.
In fiscal 2021, customers adopted 263 of our proposals, resulting in reductions of
35,848 tonnes of CO2 emissions, which raised the overall total to 267,310 tonnes, with52

SANKI REPORT 2022

Woody biomass gasification plant*Net-Zero Energy Buildings maintaincomfortable environments while reducing
annual energy consumption to as close
to zero as possible by enhancing energysaving performance using solar power
generation and other measures.

Qualification

Non-consolidated

Certified environmental measurer

Consolidated

8

9

188

205

Pollution prevention manager (cumulative total)

79

104

Qualified person for energy management

90

93Supervisor of management of industrial waste subject tospecial control

Contributing to a Zero-Waste Society⨋Current State of Industrial Waste

With respect to industrial waste discharged at our construction sites, we seek tounderstand the current status by compiling data on waste discharged at sites where SankiEngineering is the prime contractor.
We have maintained the recycling and reduction rate for industrial waste, excluding
waste disposed at final landfill sites, at high levels above 90%, and the rate was 94.8% in
fiscal 2021.We will continue to promote proper disposal by monitoring and analyzing thedischarge of industrial waste. In fiscal 2021, the waste disposal cost for construction sites
was 532,647,000 yen. Furthermore, we have been properly disposing waste CFC andExplanation for handling CFC during
HVAC inspections

SANKI REPORT 2022

53

Foundation of Sustainability Management | Environment

halons, the cost of which was 41,529,000 yen in fiscal 2021.
We work to reduce emissions of waste plastics and promote the recycling ofplastics in accordance with the Plastic Resource Circulation Act.

18,482
1,971

1,003
16,022

2017

96.6

94.8

17,321986

18,0291,377

18,616

2018

2019

2020

16,8832021(FY)

We properly dispose of hazardous substances in accordance with the laws andregulations while informing our employees about proper methods of managing thesesubstances. We have created and distributed posters to inform them of the revisions
in storage and disposal procedures for mercury-laced waste in accordance with therevision of the Waste Management and Public Cleansing Act*. Regarding asbestos,
we prepare a flow chart for the proper disposal of asbestos at construction sites
for renovation work. Also, in accordance with the Air Pollution Control Law, we will
properly report the presence or absence of asbestos-containing building materials atconstruction sites during demolition and renovation work.

*Waste Management and Public
Cleansing Law

With the aim of ensuring the proper disposal of industrial waste, in fiscal 2018 wecompleted a system for introducing digital manifests, which is now available toall departments. The rate of introduction of digital manifests was 98.7% on a nonconsolidated basis in fiscal 2021. To comply with regulatory revisions obligating the useof digital manifests, we will continue to reinforce our system for accurately monitoring
the status of disposal and recommend that business partners who have yet to connect
to the digital manifest system do so.

Poster: “How to handle mercury-lacedindustrial waste”

At each site where facilities are owned by the Sanki Engineering Group, we regularly
monitor water use and continuously consider ways to improve the efficiency of ourwater resources to reduce water use.
(m3)

Tap water

10,540Well water

26,525SANKI REPORT 2022

Recipient

Keidanren Initiative for Biodiversity
Conservation

Clearing undergrowth at the Sanki Forest

Location

Planting trees in the Hikobae Forest on
Mt. Yagoshi

NPO Mori wa Umi no Koibito

Ichinoseki City,
Iwate Prefecture

Planting trees in a forest surrounding
Shonan Village

Silva Association, Shinwa Gakuen

Yokosuka City,
Kanagawa Prefecture

Kansha-no-Mori forestation tocommemorate the 10th anniversary of
the SANKI YOU Eco Contribution Point
systemNPO Environmental Relations

Kai City, Yamanashi Prefecture

Creation of the Sanki Forest tocommemorate the 90th anniversary of
our founding

NPO Environmental Relations

Kai City, Yamanashi Prefecture

Creation of the Kijimadaira Beech
ForestNPO The Life style ResearchInstitute of Forests

Kijimadaira Village, Nagano
Prefecture

Creation of the Present Tree Forest

NPO Environmental Relations

Takayama City, Gifu Prefecture,
Miyako City, Iwate Prefecture,
Sanmu City, Chiba Prefecture⨋Spreading Our Sewage Treatment Technology Overseas

FY202137,065In addition to the tree-planting and nurturing activities launched in 2010 under the
SANKI YOU Eco Contribution Point system, we created the Sanki Forest in Kai City,
Yamanashi Prefecture, to commemorate the 90th anniversary of our founding, anda Kansha-no-Mori to commemorate the 10th anniversary of the SANKI YOU EcoContribution Point system. We donate to reforestation projects that take full advantageof the diversity of local vegetation and tree-planting activities that lead to enriching
the bounties of the sea, and also engage in environmental conservation activities that
include employee participation.
In fiscal 2021, we held a lecture by the Silva Association, our partner in tree-planting
projects, and educated our employees on preserving the forest and contributing to thenatural environment.
We also facilitated donations to two projects by three organizations in fiscal 2021 tosupport environmental conservation activities for forest management under the SANKI
YOU Eco Contribution Point system.
Project⨋Limiting Water Use

54

We expressed our support for the Keidanren Declaration of Biodiversity and Action
Policies in 2020 and established the Sanki Engineering Group Action Guidelines on
Biodiversity in April 2022. Under the action guidelines, we will further strengthen our
activities for planting and nurturing trees and promoting environment-related facilities.

▍Donation History for Tree-Planting Projects⨋Introduction of a Digital Manifest

Water use

Governance

Environment⨋Proper Disposal of Hazardous Substances▍Water UseSocial⨋Tree-Planting and Raising Activities

1,733

16,652

16,335

16,511

Environment

Foundation of Sustainability Management

17,025*Target rate: 90% or higher

97.2

G

⨋Our Response to Biodiversity■ Discharge by Group companies (t) ■ Discharge by Sanki Engineering Co., Ltd. (t)Recycling rate* for Sanki Engineering Co., Ltd. (%)
97.8

S

Realizing a Society in Harmony with Nature▍Waste Discharged at Sites where Sanki Engineering is the Prime Contractor and at the Sanki Techno Center

98.0

E

Scope:
Eight sites including the Sanki Techno Center,
Yamato Product Center, Nasu Techno Station,and field offices.

We provide sanitary water resources through our sewage treatment technology, basedon the DHS method and suitable for use in temperate regions. We have also been
participating in demonstration experiments conducted by the Japan Sewage Works
Agency in Thailand. The validity of our technology was confirmed by the results ofa demonstration experiment*1 at a sewage treatment plant in Khon Kaen City and ademonstration experiment*2 in Bangkok City, and we obtained a technology certificate.
We will continue to provide our technology to Southeast Asia and other regions where
sewage treatment has not yet been widely adopted, and we will contribute to thepreservation of the natural environment in those regions as well.

*1 With the cooperation of Khon Kaen Cityand Khon Kaen University in Thailand,
Sanki Engineering participated along withNJS Consultants Co., Ltd. (currently NJSCo., Ltd.), Tohoku University, and Nagaoka
University of Technology in the Wonder Of
Wastewater Technology Of JAPAN (WOWTO JAPAN) overseas sewage technology
verification project conducted by the
Ministry of Land, Infrastructure, Transport
and Tourism of Japan.
*2 Data provided by the National Institute forEnvironmental Studies, Japan.

SANKI REPORT 2022

55

Foundation of Sustainability Management | Social

Quality Control

VOICE

We will raise customer satisfaction and deliver new value for society by fully demonstrating the Sanki EngineeringGroup’s comprehensive capabilities and proposal-making capabilities to provide products that meet customer needs ineach business area and for high-quality systems.

Initiatives for Ensuring Quality⨋ Basic Philosophy on Quality and the Quality Management System

Photo credit: National Institute of Polar Research

Supporting the Activities of Team Members by Providing Maintenance andManagement of HVAC and Plumbing Facilities

Contributing to the Antarctic Research Expedition
with People and Technology
Sanki Engineering’s connection to the Antarctic Research
Expedition began in 1957, when we delivered roller
conveyors for the second expedition. The Protocol on
Environmental Protection to the Antarctic Treaty was
subsequently established in 1991 to protect the environment
and ecosystem of Antarctica, and we dispatched staff toJapan’s Showa Base for the first time by seconding personnel
to the National Institute for Polar Research. Since then,
Sanki Engineering has continually dispatched engineers to
Antarctica, and I am the 16th to be assigned. At the Showa
Base, where members of the expedition team operate, waste
and wastewater are generated as a result of daily life. Sanki
engineers have been responsible for investigating actual
conditions, surveying and weighing waste, monitoring
the quantity and quality of wastewater, delivering andstarting up wastewater processing facilities, and providing
maintenance and management.
As a member of the 62nd Antarctic Research Expedition,
I stayed at Showa Base for 14 months starting December
2020, managing the water supply, drainage, and HVAC
systems in more than 60 buildings and installing a newnitrogen gas extinguishing system in the Basic Observation

Building. A malfunction of any of these facilities could mean
life or death for the entire team. Having sole responsibility
for these tasks, I was under a lot of pressure, but the advice
from a member of the previous expedition and support fromteam members were truly reassuring, and I became more
appreciative of my surroundings through my work under
the harsh environment. I will spare no effort, of course, tocooperate with my successors.
Antarctic research holds the key to deciphering thefuture of the Earth and humankind. I am honored to haveplayed a part in this activity using my skills, and I will bringthis experience back to the business activities of SankiEngineering, which
continues to support the
expedition.

Yoshiyuki Arai
3rd Air-Conditioning& Plumbing Field
Engineering Department
Tokyo Branch

SANKI REPORT 2022

Our Response to ISO 9001 andISO 14001 Noncompliance(FY2019)

⿟Voluntary suspension of
ISO 9001 and ISO 14001
certifications
⿟Penalty for directors(reduced compensation)
⿟Conducted ethics seminars
for relevant divisions

P.48▍Quality and Environmental Management System

Initiatives for Environmental
Management

Top Management (President)
Quality Policy and Environmental PolicyISO
Promotion
Conference

Reports on Company-wide
activities and decisions on plans
Once a year

Management
Meeting

Approves annual policy on
QMS and EMS

General manager of the Quality and Environmental Management Office
Company-wide QMS and EMS Office Conference
Once a year

Eachdivision

Company-wide QMS and EMS Office(Sustainability Promotion Division)

Divisional managers (heads of sections, general managers of the headquarters, general managers
of research centers, heads of business divisions, presidents of branches and branch offices)

Divisional
Management Review

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

Quality and Environmental Management Officer
Divisional QMS and EMS Office

Sales, design, production, construction, and office duties

56

⿟ISO14001
3 companies:
Sanki Engineering Co., Ltd.
Sanki Kako Kensetsu Co., Ltd.
Sanki Kankyo Service Co., Ltd.

Quality Control

Seals taking a nap

Construction in progress

⿟ISO9001
2 companies:
Sanki Engineering Co., Ltd.
Sanki Kankyo Service Co., Ltd.

SocialIceberg and snow mobile

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 2021, we reviewed the operational flow of the Facilities Construction
Business and clarified its initiatives for enhancing the consistency of design
drawings to reduce the workload of site operations and improve design andconstruction quality. For the Plants & Machinery Systems Business, we reviewed
various forms and manuals to boost the effectiveness of its quality control.
Moreover, for the Environmental Systems Business, we continued to improveits checking system for each process, including stricter design reviews. In fiscal
2019, the quality management of a Sanki Engineering Group project was foundto be out of compliance. This resulted in the temporary suspension of ISO 9001
certification at the relevant division and of ISO 14001 certification at the relevantGroup company. In response, Sanki Engineering voluntarily suspended the useof its ISO 9001 and ISO 14001 certifications for six months from April 2020. We
have been continuing to improve our quality management system to prevent a
recurrence. In fiscal 2021, we applied greater rigor to the completion measurement
process in the Environmental Systems Business and created and applied theEnvironmental Aspects Assessment List in overseas operations.

Group Companies withISO Certification

Foundation of Sustainability Management

Basic Principle

ISO 9001 Scope ofAccreditation
https://www.sanki.co.jp/en/csr/social/quality/

SANKI REPORT 2022

57

Foundation of Sustainability Management | Social | Quality Control⨋ Quality Management Activities* Calculated by regarding the following
responses as “highly positive feedback.” Facilities
Construction Business: score of 4 (“Somewhat
satisfied”) or higher out of 5; Plants & Machinery
Systems Business: score of 3 (“High”) out of 3;
Environmental Systems Business: score of 70
points or higher out of 100.

⨋ Sharing Information and Preventing the Occurrence of Problems andComplaints

SocialGovernance

Quality check by a quality assurance
administrator

SocialDesign Review
The Design Division’s Design Center and Quality Control Center leadthe design reviews to scrutinize construction operations from the
aspects of quality and cost. Increase accuracy of design drawings.
Quality Risk Assessment
The Quality Risk Subcommittee of the Risk Management
Committee assesses quality risk. Divisions related to technology
and the Quality Control Center set the quality targets andidentify and address quality risks.
A poster for raising awareness of preventing
problems and complaints is created eachmonth and displayed at worksites.

At Start of Construction

During Construction

Commencement Discussions

Construction Audits

Divisions related to technology, onsite managers,and divisions related to branches and branch
offices determine the construction method(procedures) and quality targets. The Quality
Control Center checks aspects concerning quality,
construction work, costs, processes, and safety;
identifies items requiring changes in specifications
and plans; instructs on concrete measures; andconsiders design changes.

Confirmation of construction work, including designchanges, is led by divisions related to technology, onsite
managers, divisions related to branches including
branch offices, and the Quality Control Center.

⨋ Initiatives for Improving Quality by Promoting DX

We are raising the level of construction quality by promoting DX, such as ICT and BIM.
We established the BIM Promotion Center in April 2019 to launch our initiative formedium- to long-term use of BIM from the perspectives of making design drawings
more precise and setting optimal construction periods. From here on, we will
implement in-house education for promoting the use of BIM. We will also promote theapplication, research, and development of digital tools for design, construction, andacceptance inspections to accelerate our drive to improve construction quality andpromote work style reform by saving labor in construction work and alleviating theburden of management operations.
With the DX Promotion Section we set up within the Information Systems Officein April 2021, we will bolster the application of DX to operations across the Company,
including construction sites, while at the same time creating more comfortableworkplace environments.

Quality Control

SANKI REPORT 2022

We are working on improving quality throughout the construction process fromplanning and design to completion. In design, we identify and resolve issues at an earlystage by enhancing design reviews, regardless of whether they are Sanki Engineering’s
drawings or those of other companies.
In technological management, we facilitate onsite operations after the start ofconstruction work by holding commencement discussions to decide on construction
methods, procedures, and policies that result in higher quality and productivity.
Moreover, we avoid falsifications and deficiencies in quality across all processes by
having line staff and the Quality Control Center conduct stringent checks and followups. We will continue to improve quality and hand down technical expertise by having
highly skilled quality assurance administrators and technical experts conduct audits
during and after construction, implement quality confirmation and corrections, andmentor junior employees.
In fiscal 2021, we sought to further improve quality by revising our quality manualand standards as well as reviewing operational processes.

Upon Receiving Orders⨋ Improving Productivity and Maintaining High Quality

58

Environment▍Initiatives on Design and Technical Operations at Construction Sites

Initiatives for Ensuring Quality at Construction Sites
Sanki Engineering implements the Smile Site Plan, intended to create a rewarding
workplace that encourages staff to focus on their tasks by reducing workloads atconstruction sites and creating effective working environments, to satisfy bothcustomers and the Company while maintaining high quality.
Under the Smile Site Plan, we are leveling operations by establishing and effectively
implementing an operational support system for the processes of sales, design,
procurement, construction management, and quality management to improve
productivity while maintaining high quality. In an effort to simultaneously improve
productivity and maintain high quality, we particularly emphasize design verificationand pre-construction reviews before starting construction work, to raise productivity
and avoid quality risks, and to prevent rework, problems, and complaints. In fiscal 2021,
we focused on conducting separate hearings with each branch and branch office toalign their respective initiatives.

G

Foundation of Sustainability Management⨋ Understanding Customer Satisfaction and Reflecting Feedback

We accumulate and share our quality-related experiences across the Company bymeans of technical documents in order to prevent the occurrence of problems andcomplaints related to quality or, in the event they do occur, to handle them quickly andeffectively. We strive to prevent recurrences by distributing information about problems
and complaints to construction engineers through a flash bulletin, weekly bulletin(a weekly meeting of the Problems and Complaints Evaluation Committee, which isalso attended by Group companies), and monthly bulletin, which not only reports
the occurrence of issues but also discusses their causes, corrective measures, andpreventive measures. In addition to efforts to share information, quality risk assessments
are conducted by the Quality Risk Subcommittee set up under the Risk Management
Committee. We also endeavor to prevent problems and complaints by identifying risks
that may affect quality and quickly taking action.
We have sought to reduce the number of problems and complaints by setting
qualitative targets and in fiscal 2021 reduced them by 25% (down 24 cases) year-on-year
thanks to various measures for providing onsite support. Looking ahead, we will bolster
our measures to raise customer satisfaction.

S⨋ Initiatives for Design and Technical Operations

We are working to improve our construction quality with an emphasis on better
communication. To attain our quality targets as quickly as possible, we conduct risk
management and implement various measures. Along with securing quality, we
recognize that responding to problems and complaints promptly and appropriately is abasic concern for quality management, and we consistently seek to raise our standards.

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 2021, we received highly positive feedback from about 95%* of the 618
respondents. Looking ahead, we will continue to incorporate customer opinions into
our operations to enhance construction quality.

E

Completion Audits
Check whether quality targets are being achieved
and offer instructions for corrections as needed.

Digital Tools Developed by the
Sanki Engineering Group⿟Automated robotic air flow
meter
Automatic measurement of air
flow from air conditioner vents.
Expected to reduce manhours by 75% compared to theconventionally used process.

Enhancing Our Technologies
P.70
Promoting the Smile Project⨋ Technical Awards for Improving Construction Methods and Operational
Processes
We have been presenting awards for excellent ideas that improve operational
processes, such as raising efficiency, in addition to ideas that improve construction
work. In fiscal 2021, we received 2,017 applications.

Air-flow measurement by anautomated robot

SANKI REPORT 2022

59

Foundation of Sustainability Management | Social | Quality Control

Foundation of Sustainability Management | Social

Occupational Healthand Safety⨋ Fostering Human Resources to Sustain Our Technological Competence▍Number of Personnel with Quality-Related Qualifications (as of April 1 of each fiscal year)
FY2021
NonConsolidated
consolidated

Qualification
Professional engineers

FY2022
NonConsolidated
consolidated

103

92

102

1,324

1,125

1,277

Architect

39

45

37

42

Facilities construction architect

205

215

201

210

Electrical engineers

160

229

162

236

27

38

26

34

First class instrument engineers

302

312

297

306

Fire protection engineers
Qualified managing engineers

688

767

699

783

1,655

1,939

1,635

1,921

Training for new employees

https://www.sanki.co.jp/en/csr/social/safety/

Note:
Cumulative figures are shown for all
qualifications.

Initiatives in Fiscal 2021
⨋ Key Items Implemented in Fiscal 2021

20th conference on electrical construction quality▍Major Skill Development Activities for Fiscal 2021
Initiatives

Initiatives
at the Sanki
TechnoCenterInitiatives forpassing ontechnology

Initiatives
for Groupcompanies
andsubcontractors

Training

Description of Training• Seminar for new employees, basic skills training

73 participants

Correspondence course for attaining
qualifications• Preparation for qualification exams for construction managing
engineers and fire protection engineers

85 participants

Training based on operational
experience*
Third (fourth) year in construction work
Sixth (seventh) year in construction work
Ninth (tenth) year in construction work

• 3 - to 5-day training sessions that are held 2 to 5 times per year at 3-year intervals• Standardized group-based training according to operational experience• Technical training using actual equipment and mock-ups• Drills for preventing problems and complaints required in construction
management

On-the-job training by technicalexperts• P ractical on-the-job training offered by technical experts selected fromall branches who participate in onsite commencement discussions andconstruction audits

19 technical experts made 1,408 site visits(cumulative total)

Conference on electrical construction
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 the SankiEngineering-certified Class A Electrical Engineer qualification.

21 participating technicians from 18
subcontractors• Case studies at liaison meetings held at branches and branch offices

Number of sessions
Tokyo branch: 4 Kansai branch: 25
Chubu branch: 11 Kyushu branch office:
22 Hokkaido branch office: 3 Chugoku
branch office: 9 Tohoku branch office: 10
Hokuriku branch office: 6⨋ Collaborating in the Industry through Open Technology

Construction instructions for the Aluminger®* aluminum refrigerant piping method
developed by Sanki Engineering have been made available to the Aluminum
Plumbing Equipment Association (APEA). By promoting the adoption of our method,which reduces labor by 25% compared to conventional methods, we are contributing
to standardizing environmentally sound technology 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 prevent the
spread of the novel coronavirus, and participate in this initiative to play our role inending the pandemic. We are contributing nine proprietary technologies deemeduseful for preventing infections, such as our clean room units, which have been
installed in medical and research facilities.

60

Results

Training for new employees

Explanation of problems andcomplaints

SANKI REPORT 2022

Basic Health and Safety Principles

Held 10 times

In fiscal 2021, there were fewer accidents than in previous years, and we saw a declining
trend in the number of falls or tumbles and traffic accidents, which had been occurringwith greater frequency, as well as in the percentage of accidents involving workers withfive years of experience or less. However, the number and percentage of accidents
involving skilled workers with 21 or more years of experience rose. In fiscal 2021, while
continuing online classroom training, we strengthened educational activities for
reducing accidents by holding face-to-face training sessions with a focus on practicalskills and also group discussions.
In light of the social and industry trends and accidents that occurred in fiscal 2021,
we will implement focused patrols that address accident tendencies and increase
training opportunities for safety managers and workers in fiscal 2022.

PosterpromotingsafetyOccupational Health and Safety

Chief electrical engineers

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 Company-wide
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.

Social93
1,132

Construction managing engineers (civil works,
construction, electrical construction, pipe-laying works)

Occupational Health and Safety Policy and Structure

Foundation of Sustainability Management

The Sanki Techno Center provides training to help employees acquire basic skills, brushup on their skills, and attain qualifications. Due to the spread of COVID-19, in fiscal 2021
we conducted new employee training, including basic skills training and safety training,both online and through group training at four separate sites (Sanki Techno Center,
Tokyo branch, Kansai branch, and Chubu branch) over two months.
We also conduct training for construction managers every three years, and thecontent is based on number of years of experience. As for the skills of our engineers,
we develop them through hands-on practice and drills using actual machinery andfacilities at the Sanki Techno Center.

Poster promoting health
182 participants

Outline of Activities in Fiscal 2021: Policies on Health and Safety Activities
SloganStop and Check! Let’s all follow operational procedures as basics that stay the same in changing times.
SafetyKey Actions
1. P
 revent accidents associated with repetitious tasks(experience, form, time)◦Promote and expand onsite hazard prediction
activities by each individual◦Hold liaison meetings with the relevant Safety
and Health Committee secretariat◦Review the disaster notification method◦Implement systematic patrols* Due to the spread of COVID-19, training basedon operational experience was not held in fiscal
2020. Therefore, the equivalent of two years of
training sessions took place in fiscal 2021.
* A new construction method whereby
lightweight aluminum pipes are used insteadof copper pipes, and they are connected withspecialized tools to save labor.

Health

1. I mplement measures on health and productivity
management◦R educe long working hours, encourage employees
to take days off◦I mplement health improvement activities andeducation

2. Develop sustainable partnerships◦Bolster collaboration with subcontractors◦Review the Sanki OHSMS system◦Provide guidance on how to manage safety documents
3. Implement a new style of education to build trust◦Provide original educational programs for employees◦E stablish an educational system that meets the needs of
subcontractors
2. Implement mental health measures◦Provide mental health education

SANKI REPORT 2022

61

Foundation of Sustainability Management | Social | Occupational Health and Safety

Foundation of Sustainability Management | Social

Supply Chain⨋ Safety and Quality Conventions and Safety Patrols

Basic Principle

Safety patrol by the president⨋ Health and Safety Training

Type⨋ Procurement Activities and Initiatives

Online health and safety training

Number of Participants (from Subcontractors)

Special education and other courses

1,936(1,390)

Health and safety training for foremen

163

(108)

In-house health and safety training

410

(4)

Position-based training for young and mid-career employees

385

(40)

Other client-focused training

115

(115)

3,009

(1,657)

Total* Limited to training by in-house instructors,
not including training at designatededucational institutions● Frequency rate for Sanki Engineering ● Average frequency rate for the general construction industry*3◆ Severity rate for Sanki Engineering ◆ Average severity rate for the general construction industry*3■ Number of accidents

1.69

1.09
0.86

1.11

0.81
0.18

0.30

0.29

1.30

1.39

0.44

0.44

8

0.02

0.00

0.03
11

1

2017

62

SANKI REPORT 2022

20182019 ()Number of accidents:
interrupted work for one day or longer*2 Severity rate: Calculated as the numberof lost workdays caused by accidents inthe construction site per one thousandworking hours, this figure indicates theseverity of the accidents.

0.11

0.03

Scope:Sanki Engineering construction sites(Sanki Engineering Co., Ltd. andbusiness partners)*1 Frequency rate: Calculated as the numberof deaths and injuries caused by accidents
in the construction site per one million
working hours, this figure indicates thefrequency with which accidents occur.
0.41

0.24

0.10

3

3

2020

2021

()

1. Fair Market Competition and Trading
2. Protection of the Global Environment
3. Contribution to Society ThroughBusiness Activity
4. Respect for Human Rights
5. Information Security Risk Management
6. Development of Partnerships

Sanki Engineering Group
Procurement Policies
https://www.sanki.co.jp/en/csr/social/scm/

We engage in fair, equitable, and transparent transactions with all business partners inaccordance with the Sanki Engineering Group Code of Conduct and Action Guidelines
and with the Sanki Engineering Group Procurement Policies. Furthermore, our basic
contract includes provisions on product safety, quality control, intellectual property,
legal compliance, and the exclusion of anti-social forces.

Period: T he data compilation period waschanged from the calendar year to
the fiscal year starting with fiscal
2020 results.

▍Number of Accidents, Frequency Rate*1, and Severity Rate*2

In April 2021, we formulated the Sanki Engineering Group Procurement Policy and havebeen engaging in procurement activities with the understanding and agreement of all
business partners.
The procurement cost of materials and equipment used by Sanki Engineering
for construction work is approximately 42.0 billion yen, with domestic suppliers
representing the source for nearly all procurement. The role of the procurement
department includes contributing to profit and supporting orders through cost
reductions, building and managing procurement databases, and collecting anddisclosing information on material and equipment price trends and delivery dates. As
the prices of materials and equipment surge and delivery delays continue due to theinternational situation, including the COVID-19 pandemic and semiconductor shortage,
the department will continue to collect information as quickly as possible while also
taking countermeasures (as of August 2022).

Procurement Policies (excerpt)⨋ Thoroughly Ensuring Fair and Equitable Transactions⨋ Accidents in Fiscal 2021

In fiscal 2021, there were three accidents, the same as in fiscal 2020. A detailed analysisof the circumstances of these accidents revealed they were mostly the result of
shortcomings in operational procedures, so a continuous effort will be required topromote thorough compliance with the rules and raise the level of our activities by
sharing information.

Building Fair, Equal, and Transparent Business Relationships

Supply Chain▍Number of Participants in Health and Safety Training (Fiscal 2021)*

Instructional video on preventing falls to be viewed
before using full harness-type equipment

SocialFor our own Group employees and for staff employed by subcontractors, SankiEngineering provides training led by in-house instructors or at designated training
institutes. Specifically, for newcomers to the construction site, we distribute health andsafety handbooks and organize joint training sessions with the Sanki Health and Safety
Cooperative Association.
In fiscal 2021, as in the previous year, we focused on conducting special training
sessions using full harness-type equipment with the aim of preventing falls, in viewof regulatory revisions. While there were concerns about the spread of COVID-19, weoffered a program combining online and face-to-face training sessions to effectively
implement health and safety education. We also sought to enhance the safety
management capability of the Sanki Engineering Group as a whole by conducting
position-based programs for young and mid-career employees across the Group, which
had been offered in the past at each branch or branch office.

The Sanki Engineering Group Code of Conduct and Action Guidelines stipulate that we engage in fair transactions
with all business partners. We promote free market competition and conduct business in good faith and in accordancewith the relevant laws and individual contracts while at the same time fulfilling our social responsibility by following
the Sanki Engineering Group Procurement Policies. We also uphold the Sanki Engineering Environmental Policy topromote environmentally sound procurement activities, including green procurement, as part of our environmental
management. Under these principles, we endeavor to build trust with our business partners to jointly provide highquality systems and services to customers.

Foundation of Sustainability Management

Every year in June, the preparatory month for National Safety Week, Sanki Engineeringholds safety and quality conventions at each branch, branch office, and division at 11
domestic sites and 2 overseas sites. In fiscal 2021, as in the previous year, the convention
was held online due to the spread of COVID-19. It was attended by the president andthe Central Safety and Health Committee Chairperson. We also conduct special joint
safety patrols, during which the president and directors tour 23 construction sites in thesummer and before and after year-end.

⨋ Initiatives to Raise the Efficiency of Procurement Operations

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 with major
business partners and with a “one-stop work-sharing” system that handles everythingfrom price negotiations to ordering operations. The division also promoted thedigitization of ordering and progress billing, introduced a procurement website andweb-based invoicing system, held briefings for business partners, and conductedfollow-ups. In fiscal 2021, a cloud-based system was developed for suppliers for greater
convenience, and 95% of all orders are now processed electronically. We plan to extend
the Procurement Web to Group companies to further improve the efficiency of our
procurement operations.

Procurement website*3 Source: Survey on Industrial Accidents,
Ministry of Health, Labor and Welfare.

SANKI REPORT 2022

63

Foundation of Sustainability Management | Social | Supply Chain⨋ Exchange of Views with Business Partners⨋ Training for Procurement Staff⨋ Awards Programs

Procurement staff training▍Outline of Main Training Sessions (FY2021)
Results

Negotiatingskills• Logical thinking • Emotional Intelligence Quotientmanagement • Enhanced communication skills • Enhanced
problem-solving skills

20 sessions
320 participantsBasicknowledge on
procurement
and technology• Cloud-based Procurement Web • Basic knowledge ofaccounting • Compliance • Automated control systems• Basic knowledge of facilities technology

23 sessions
554 participants⨋ Operation of Internal Whistleblowing Hotlines

We operate the Corporate Ethics Hotline to prevent any improper transactions. Also,
we strive to conduct fair transactions with our business partners by providing themwith information on how to use the hotline and sending written requests for theircooperation in ensuring that business activities are sincere and fair.

P.82

Whistleblowing System

Strengthening Cooperation with Business Partners⨋ 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 results.

⨋ Providing Assessment Feedback to Business Partners

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 assessmentof their safety management. We pay visits to provide them with feedback on theassessment results and exchange information on improvements as needed to enhancetheir 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 holdseminars to enhance technical skills and thoroughly enforce quality management andsupervision of safety and health at construction sites. Moreover, we review the status

64

SANKI REPORT 2022

SocialGovernance

Online national meeting of Sanki Health and
Safety Cooperative Association

Number of Sanki Super Meister
Award Recipients

⿟FY2020: 17
⿟FY2021: 9
Number of Sanki Best Partner
Award Recipients

⿟FY2020: 172
⿟FY2021: 168⨋ Initiatives for Maintaining and Upgrading the Technical Skills of
Subcontractors

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

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
the creation of a mechanism for enhancing technical skills based on collaboration
between Sanki Engineering and subcontractors, in which the Sanki Techno Center isalso used to train new hires and mid-career employees of subcontractors (no training
was conducted in fiscal 2021 due to the COVID-19 pandemic). Furthermore, as part ofour technical training program, new hires at Sanki Engineering receive guidance from
employees of subcontractors.

⨋ Providing Support to Stabilize the Management of Subcontractors

As of March 2020, we are making all our payments in cash to subcontractors withcapital of less than 40 million yen by modifying the payment terms. Under the MediumTerm Management Plan “Century 2025” Phase 3, we intend to further improve payment
terms for our business partners, with a plan to extend these terms to subcontractors
with capital of 40 million yen or more. We are committed to supporting the stable
management of subcontractors to pursue sustainable growth together.

VOICE

Content

Environment

Supply Chain

Theme

We established the Sanki Super Meister System to certify and commend foremenof Group subcontractors whose superior construction techniques have significantly
contributed to elevating 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 zero accidents. We provide subsidies designed to encourage
further quality improvements to subcontractors to which the certified foremen belong,from the standpoint of promoting consistent contributions to quality improvements atconstruction sites.

G

SocialWe organize training as needed to promote appropriate procurement activities andenhance the purchasing and negotiating skills of procurement staff. We also provide
support for obtaining registered qualifications for Certified Procurement Professionals,
construction business accountants, and fundamental information technology
engineers. In addition, we provide training for developing purchasing and negotiatingskills and conduct compliance training in areas such as fair trade and respect for humanrights to enhance skills and knowledge.

S

Foundation of Sustainability Managementof safety and health management and offer guidance by dispatching employees toprovide safety and health education as well as courses on obtaining qualifications andby conducting joint patrols.
The Sanki Health and Safety Cooperative Association meets twice a year. In fiscal
2021, we held three online meetings due to the spread of COVID-19, and these wereattended by a total of 58 employees from our Group and 66 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
involved in construction, the meeting is expected to raise awareness about disasterprevention.

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 2021, we visited 30 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.

E

Practicing Safety First, Even During the Pandemic
Amid the ongoing COVID-19 pandemic, Sanki Engineering has provided various kinds of support
for implementing disaster prevention to members of the association under its policy for developing
sustainable partnerships as a key action area for safety. I feel that Sanki Engineering has contributed
to enhancing safety management by creating opportunities for concrete learning, such as by holding
seminars and creating video tutorials for accidents, and is thereby expanding the scope of activities of
the Sanki Health and Safety Cooperative Association.
Air Products Co., Ltd. Chairman, Chubu Sanki Health and Safety Cooperative Association | Mr. Koichi Nishino

SANKI REPORT 2022

65

Foundation of Sustainability Management | Social

E

S

G

Environment

SocialGovernance

Human Resources⨋ Career Change System
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 the Company, respectindividuality, 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 comfortableworking environment that fosters the development of human resources based on our unique Sanki spirit, enablingthem to work to their full potential. In January 2020, we established the Smile Work Guidelines, which outline the basic
policies for our working environment and human resource development.

https://www.sanki.co.jp/en/csr/social/smile-project/

Promoting Diversity⨋ Extension of Retirement Age and Post-Retirement Reemployment System

Employees at Sanki Construction
Engineering (Shanghai) Co., Ltd.

We believe that creating opportunities in which female employees can further
demonstrate their talents would lead to sustainable growth for the Company and inturn boost our corporate value. In addition, we have formulated an action plan to create
an environment in which our female employees can continuously develop their careers
based on the Act of Promotion of Women’s Participation and Advancement in the
Workplace—commonly referred to as the Act for Promoting Women’s Careers—andare pursuing various measures to promote women’s careers. We have set new action
plan targets that reflect the results of fiscal 2020 and have begun to take actions forachieving the new targets in fiscal 2021.

Plan period: April 1, 2021 to March 31, 2026

66

2

Raise the ratio of women in managerial positions* to the constructionindustry average of 3%.

SANKI REPORT 2022％

To provide an environment in which employees can continue to work with a sense of
security for a long time, we have extended the retirement age to 65 as of April 2022.
In conjunction with the introduction of an optional retirement age system, employees
will receive full retirement benefits from age 60 to 65, even if they retire at their own
request. Employees may also choose to be reemployed between the ages of 60 and 65.
In fiscal 2021, we reemployed 226 retired employees on a consolidated basis.

⨋ Revision of Personnel System▍Action Plan Based on the Act for Promoting Women’s Careers

Increase the average length of service for women by 10% or morefrom April 2021.

2.24

Developing and Evaluating Human Resources⨋ Promoting Women’s Careers

1

Employment rate of persons withdisabilities(non-consolidated) as of June 2022

Human Resources⨋ Respecting Diversity in Employment

Training using a transliteration app

SocialWe believe that creating working environments in which various personnel are able todemonstrate their particular capabilities will raise the value of our company. With this inmind, we are cultivating a corporate culture that respects the diversity of employees andestablishing various programs toward our goal of creating a working environment that iseven more pleasant for employees.

Goals⨋ Creating Workplaces for Persons with Disabilities

We continue to hire persons with disabilities and are working to create an environment
in which they can work comfortably over long periods. As of June 2021, theemployment ratios of persons with disabilities were 2.10% and 1.82% on a nonconsolidated and consolidated basis, respectively. As of June 2022, the employment
ratio of persons with disabilities was 2.24% on a non-consolidated basis.
In recruiting, we expanded our channels and at the same time matched applicantswith each department and provided care upon acceptance. Also, in order to retain
human resources, we hold problem-solving seminars, opinion exchange sessions, andmanagement training to promote understanding among managers, for employees
who are hearing impaired. In addition, we are promoting the improvement of ourworking environment so that all employees can play an active role by, for example,
installing lamps in all offices that bear evacuation instructions for hearing-impaired
employees in the event of a disaster and by providing closed captioned presentations
during Web-based training and financial results briefings.

Smile Work Guideline

We seek to bring on board human resources that differ in gender and nationality as
well as in talent and personality. Staff from the sales, design, technology, and otherdivisions join the Human Resources Department to ensure fairness based on multiple
perspectives. As of March 31, 2022, 109 employees (25 women and 84 men) from theU.K., Thailand, Vietnam, Peru, Russia, South Korea, China, Austria, Germany, Slovakia,
Slovenia, and Bosnia are working with us at Group companies around the world. Under
our Medium-Term Management Plan, we will continue to hire foreign nationals so that
we steadily develop our overseas operations and promote diversity.

In 2019, we established new career types, namely the career-track position andoperational position, and introduced a system that allows employees to switch
between these career paths. Job relocation is excluded from the requirements forthe career-track position, and the system is designed to enable a wider range of
employees to thrive. In fiscal 2021, eight employees changed their career type for awork style that better suits their particular stage in life.

Foundation of Sustainability Management

Our Commitment to Employees

Results (as of April 1, 2022,
non-consolidated)14.1 years(4.4% increase)
2.3%(1.4 percentage point increase)* Aggregated on different date from“number of managers” referred to on
page 71

As one of the key measures for becoming the “Company of Choice” under the MediumTerm Management Plan “Century 2025” Phase 3, we launched a new personnel system
to improve employee comfort and satisfaction in April 2022. It had been pointed outthat our past system contained too many grades and the roles and salary structure ofline managers were unclear. We addressed this by clarifying the roles of managers, suchas labor management and development of subordinates. We also revised the numberof grades for managers and simplified the compensation system and rules for raisingsalaries and promoting managers.
Furthermore, under the past compensation system, employees who demonstrated
their talents in specialized fields received a pay raise when they were assigned to line
management, making it difficult to assign the right personnel to the right positions.
To address this, we established a compensation system that rewards competentemployees in specialized areas of expertise and, at the same time, conducted a major
review of the number of line managers assigned to management duties.

Initiatives for Reviewing the
Personnel System

⿟Correct long working hours
by clarifying the roles ofmanagers
⿟Provide a clearer assessmentof each employee’s
performance by simplifying
the compensation system
and rules for pay raises andpromotions
⿟Establish a working
environment for extending
the retirement age to 65 andenabling employees to work
up to age 70
⿟Create a compensation systemthat rewards employees whoare competent in specialized
fieldsSANKI REPORT 2022

67

Foundation of Sustainability Management | Social | Human Resources⨋ Personnel System for Workplaces Where People Can Grow

Mid-Career Employees

Management candidate
training

Second-year training
Management Training

Fourth-year training

Section chief training

Seventh-year training
New employee training
Qualification training

Safety Training

Safety experiential training
Corporate ethics training

Corporate Ethics Training

Mid-career staff training
Qualification training

Technical Training

Technical experiential training
Facilities
Construction

New employee
training
Third-year construction
work training
Sixth-year construction
work training
Ninth-year construction
work training
Qualification training

Plants & Machinery
Systems

New employee training
Inspector education
Training on our products and systems
ISO9001/ISO14001

Quality & Environment
System Training

68

SANKI REPORT 2022

Executives

Leadership position training

New employee training
Mid-career staff training

Education to developinternal auditors

Department manager training

SocialGovernanceSanki Engineering seeks to provide a rewarding and fulfilling working environment
for each individual by engaging with its employees and, to that end, it conducts aquestionnaire on the working environment. In response to questionnaire items on
employee awareness, 98.6% of the respondents indicated they felt that the Group’sbusiness is contributing to society*. We will consider introducing various measures
based on the results of the questionnaire.
Furthermore, since fiscal 2016, we have been holding Century Communication
Up (CCU) discussion events in accordance with the Century 2025 long-term vision.
Opinions and proposals obtained through the CCU have been applied to improving ouroperations and systems. In April 2022, we organized a new employee CCU to provide an
opportunity for face-to-face dialogue between new employees and executive officers.

Average education and training
costs per employee in FY2021(consolidated)

76,000yen/year⨋ Sound Employer-Employee Relationships

The Human Resources Department and employees union at Sanki Engineering meetmonthly to discuss improvements in the working 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 and have been
implementing measures based on the dialogues.

New employee CCU with executive officers* The percentage of employees who
responded “Yes” when asked whether
they felt the Sanki Engineering Group iscontributing to society under the topic of“working at the Sanki Engineering Group,”
for which the response options were “Yes,”“No,” or “no response.”⨋ Maintaining and Improving Employee Health

Human Resources

Younger Employees

New employee training

Environment

Social▍Training Systems

G

Foundation of Sustainability Management

We maintain training systems associated with each career path, such as management
training, technical training, and training by field of expertise, in order to strengthen
specialized, technical, and management skills. We take advantage of the Sanki
Technology Center to conduct various training programs.
In fiscal 2021, we conducted all new employee training sessions online for two to
three months to prevent the spread of COVID-19. In fiscal 2022, we conducted faceto-face training for new employees by implementing thorough measures against
infection.

S

System for Gathering Employee Feedback

Our personnel system ensures equal opportunity as well as fair evaluation andtreatment for all employees while supporting employee initiatives for self-directed
career development. For younger employees, we conduct individual interviews by
personnel managers in their third and fifth years of service. We also introduced amentor system for supporting younger employees.
Once a year, all employees fill in a Career Development Sheet and receive feedback
through an interview with their supervisors. To collect their opinions, we have anothersystem that allows employees to bypass their superiors and speak directly with the
Human Resources Department depending on the content of the sheet. These measures
are offered separately from the evaluation system.
In addition, we strategically appoint diverse human resources as core personnel. On
a consolidated basis, there were 197 mid-career hires in management positions as ofMarch 31, 2021.

⨋ Education and Training Systems

E

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 conduct stress checks to prevent employees from developing mental healthissues. We are working to identify sources of stress by also consulting the results ofevaluations by external organizations. Also, to maintain and improve employee health,
we conduct a variety of projects such as quarterly health-related campaigns using awalking application.

Promoting Work Style Reform

Screen displaying the “aruku&” walking app⨋ 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 and female
employees can continue to work with a sense of security while attending to various life
events. In addition, we are promoting improvement of the environment that enables
flexible work styles by reviewing our work and leave programs. 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 employee
training online.
In February 2022, we held an online lecture on balancing work with nursing careand childcare, with 183 participants, mainly managers, including those from Group
companies. We invited Ms. Yumiko Onishi of Work-Life Balance Co., Ltd. to give a lecture
based on her own experience on how to balance work with life events such as childcare
and nursing care, and how to support subordinates as a manager. The lecture helped
participants to deepen their understanding about improving the work-life balanceacross the entire workplace.

FY2021 rate of paid leave taken(consolidated)

55.6
23.9

%

Average monthly overtime work perperson (consolidated)

hours

SANKI REPORT 2022

69

Foundation of Sustainability Management | Social | Human Resources⨋ Acquiring the Kurumin Mark and Recognition for Supporting Childcareby the City of Nagoya

FY2017

City of Nagoya
certification forcompanies supportingchildcare

Consolidated
Reinstatement afterchildcare leave (%)
Nonconsolidated

Rate of paid leave
taken (%)

Certified as 3.5 stars in the NIKKEI Smart
Work Management Survey

⿟Follow up with employees
who work long hours basedon stress check results
⿟Raise efficiency by introducing
cloud-based systems
Initiatives for Ensuring
Quality at Construction Sites▍Major Programs Supporting Work-Life Balance (Non-consolidated) (as of April 2022)
Details

Refresh leave

Five consecutive days of leave for each five-year period of employment using employee’s reserved leave.

Consecutive leave for construction managers

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 are encouraged 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 and telework system

Aims to improve operational efficiency and business continuity during childcare and nursing care or in the event ofemergencies such as natural disasters and pandemics.

Sliding work hours

Employees can slide the start and end times forward or back for business or non-business reasons insofar as
this does not interfere with their work.

Return to Work program

Employees who have left the Company for unavoidable reasons such as childbirth, childcare, nursing care, ora spouse’s transfer can apply for reinstatement.

Childcare leave

Can be obtained for the requested period of time up to when the child turns one year old.

Nursing leave

Can be obtained five times for up to 180 days per person on nursing leave.

Shortened work hours

Employees caring for children or other family members can apply for shortened or sliding work hours. In thecase of childcare, the program applies to children up to the third grade of elementary school.

Support for childcare leave and reinstatement

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

Special childcare/nursing leave

Can be obtained multiple times and up to 20 days in total for childcare and nursing care.

FY2019FY2020

FY2021

Male

Female

Total

Male

Female

Total

Male

Female

Total

2

18

20

7

11

18

9

27

36

7

33

40

Male

Female

Total

32

42

10

2

14

16

7

9

16

7

24

31

7

27

34

9

30

39

100.0

100.0

100.0

100.0

88.9

93.8

100

96.3

97.2

100.0

100.0

100.0

100

93.8

95.2

100.0

100.0

100.0

100.0

88.9

93.8

100

100

100

100.0

100.0

100.0

100

100

100

Consolidated

0

0

0

1

0

1

1

1

2

0

0

0

0

0

0

Nonconsolidated

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

─

54.0

76.1

57.1

54.3

76.3

57.4

53.4

67.1

55.3

53.2

69.7

55.6

53.7

53.0

74.2

55.9

51.9

74.4

55.1

52.5

65.8

54.5

52.4

69.5

55.0

Consolidated
Nonconsolidated

49.9

78.2

Consolidated

─

─

─

─

─

─

37.4

14.7

34.3

31.7

12.3

29.0

28.3

8.98

23.9

Nonconsolidated

31.2

13.3

28.6

35.0

14.7

32.0

34.5

13.6

31.3

33.0

13.3

29.9

33.0

12.8

22.9

FY2017FY2018FY2019FY2020

FY2021

Male

Female

Total

Male

Female

Total

Male

Female

Total

Male

Female

Total

Male

FemaleTotal

Consolidated

2,079

305

2,384

2,072

322

2,394

2,152

349

2,501

2,190

358

2,548

2,226

381

2,607

Nonconsolidated

1,698

271

1,969

1,694

273

1,967

1,705

287

1,992

1,740

308

2,048

1,770

326

2,096

Consolidated

─

─

─

─

─

─

─

─

─

91

22

113

84

25

109

Nonconsolidated

─

─

─

─

─

─

─

─

─

17

6

23

19

5

24

Consolidated

664

5

669

602

5

607

646

7

653

643

8

651

687

9

696

Nonconsolidated

586

5

591

528

3

531

526

3

529

527

4

531

582

5

587

Consolidated

─

─

─

44.5

38.2

43.7

44.7

38.3

43.8

44.7

38.8

43.8

45.3

41.1

44.4

Nonconsolidated

43.8

36.3

42.8

43.9

37.1

43.0

44.1

37.6

43.2

44.2

38.0

43.2

44.2

38.2

43.2

Consolidated

─

─

─

17.3

13.0

16.7

17.3

12.9

16.7

17.5

13.2

16.9

14.0

10.9

13.5

Nonconsolidated

18.8

13.2

18.0

19.0

13.9

18.3

19.3

14.1

18.5

19.4

14.0

18.6

19.5

14.2

18.6

Consolidated

─

─

─

─

─

─

70

15

85

73

18

91

79

20

99

Nonconsolidated

72

20

92

71

9

80

67

15

82

70

18

88

76

19

95

Consolidated

─

─

─

─

─

─

32

13

45

26

13

39

25

12

37

Nonconsolidated

13

1

14

4

2

6

7

8

15

5

9

14

5

3

8

Consolidated

217

5

222

223

9

232

229

11

240

212

12

224

216

10

226

Nonconsolidated

164

3

167

161

5

166

169

8

177

173

9

182

176

10

186

Consolidated

─

─

─

─

─

1.89

─

─

1.94

─

─

1.77

─

─

1.82

Nonconsolidated

─

─

1.78

─

─

1.93

─

─

1.97

─

─

1.99

─

─

2.10

Consolidated

─

─

─

─

─

─

─

─

─

1.7

2.2

1.8

2.4

3.5

2.6

Nonconsolidated

─

─

─

─

─

─

─

─

─

1.5

1.6

1.5

1.7

2.3

1.8

Employees
Number of
employees
Number of
non-Japaneseemployees
Number ofmanagers

Human Resources⿟Clarify work responsibilities
by reviewing the personnel
system

FY2018Total▍Employee Data (as of March 31 of Each Fiscal Year)

Average years ofservice

SANKI REPORT 2022

GovernanceSocialMajor Initiativesof the Smile Project

Average monthly
overtime work(hours per person)

Average age

70

SocialFemaleNonconsolidated

Nursing care leave

P.58

Childcareand nursing
care

Environment

Foundation of Sustainability Management

The Kurumin markfor support of raisingnext-generation
children

Sanki Engineering launched the Company-wide Smile Project, led by the president, in
fiscal 2015 to promote work style reform. We have been implementing initiatives acrossthe 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 worked on efforts
to lessen the operational load of construction managers and enhance capabilities andquality at our construction sites. In fiscal 2020, we launched the Smile Plan, consistingof four subcommittees, to establish a system that enables all departments to work
together as one. As a result of these efforts, we were rated 3.5 out of a scale of 5 stars
in the 5th NIKKEI Smart Work Management Survey, which selects advanced companies
that challenge the productivity revolution through work style reform. Looking ahead,
we will continue to promote our work style reform under the employee-first principle.

Work

G

Male

Consolidated

Childcare leave⨋ Promoting the Smile Project

ProgramS▍Number of Employees on Leave and Work Hours

In 2015, Sanki Engineering was granted an update for the Kurumin mark, a certificate
granted by the Tokyo Labor Bureau of the Ministry of Health, Labour and Welfare andbased on the Act on Advancement of Measures to Support Raising Next-Generation
Children, for meeting certain criteria as a company supporting childcare. In 2014, theChubu Branch became the first construction equipment company to be recognizedby the City of Nagoya as a company supporting childcare, and the certification was
updated in 2017.

Area

E

Employment
Number of new
recruits

Number of midcareer hires
Numberof rehired
employees after
retirement
Rate of persons
with disabilities*1(%)
Turnover rate
due to personalreasons*2 (%)*1 As of June 1 of each fiscal year *2 Ratio of retired employees to the total number of employees in each fiscal year

▍Employees by Age (as of March 31, 2022)
10s

20s

30s

40s

50s

60s

70s

Male Female Total

Male Female Total

Male Female Total

Male Female Total

Male Female Total

Male Female Total

Male Female Total

Total

Consolidated

3

0

3

380

105

485

463

112

575

506

92

598

604

57

661

233

14

247

37

1

38

2,607

Nonconsolidated

3

0

3

341

97

438

389

99

488

362

75

437

478

45

523

171

9

180

26

1

27

2,096

SANKI REPORT 2022

71

Foundation of Sustainability Management | Social

E

S

G

Environment

SocialGovernance

Local Communities
Supporting the Development of the Next Generation
As stated in the Sanki Engineering Group Code of Conduct and Action Guidelines, “We seek to contribute to society
in order to aid in the development of local communities as a good corporate citizen and member of society,” and ouractivities reflect this principle. We will continue to participate in local activities and help with their development while
maintaining active communication with stakeholders in the areas where we operate.

⨋ Opening the Sanki Environmental Garden to the Local Public

The Sanki Environmental Garden, adjacent to the Sanki Techno Center, is open roundthe clock to members of the local community, providing a place to play for many
children from neighboring daycare centers. In March 2022, the total number of visitors
reached 36,000. We expect that the Sanki Environmental Garden will continue to be
used by the community as a place to relax, and to nurture the next generation over thelong term.

⨋ Dispatching Employees as Lecturers

Cooperating with Local Communities⨋ Agreement for the Provision of Facilities in Times of Disaster⨋ Sanki Kankyo Service Welcomes Social Studies Tours by Local Schools
Space in the Sanki Techno Center (lobby) for
sheltering people unable to return home in
the wake of a disaster⨋ Cleanup and Environmental Beautification Activities

Each branch, branch office, and Group company participates in cleanup activities inareas around their offices or construction sites as well as environmental beautification
activities organized by municipal governments. Employees at Group companies havecontinuously participated in cleaning the streets near the waste and water treatment
facilities respectively operated and managed by Sanki Kako Kensetsu and Sanki Kankyo
Service, and in removing snow after heavy snowfalls. On a Group-wide basis, we carriedout activities in more than 35 local communities in fiscal 2021.

▍Activities in Fiscal 2021

• Held the third “Kizuna” Tsugaru Shamisen Concert to promote reconstruction from the Great East
Japan Earthquake at the Ginza Oji Hall and broadcast the event on YouTube• Paid our sixth visit to affected areas in Kamaishi and Rikuzentakata• Provided a lunch menu featuring ingredients sourced from the Tohoku region at the Sanki Techno
Center cafeteria

Our Group company Sanki Kankyo Service actively invites elementary school children
for field trips at its offices.
In May 2021, the Imakane office in Hokkaido received 41 students from Imakane
and Tanekawa Elementary Schools. In August, the Suttsu office in the same prefecture
welcomed 19 students from Suttsu Elementary School. In addition, the Suttsu officein Hokkaido welcomed nine students from Oshoro Elementary School in September,and the students learned about the role and workings of the sewerage system. We alsoorganize facility tours for local residents.

⨋ Support for Sports Promotion and Revitalization

Snow removal work

Earthquake Reconstruction Project
We launched the Earthquake Reconstruction Project in May 2012, a year after the Great
East Japan Earthquake, as a Company-wide action team for contributing to the earlyrecovery of the affected areas. Since then, we have conducted various activities eachyear to support the reconstruction effort, prevent memories of the disaster from fading,dispel harmful rumors, and share information on disaster prevention and mitigation.
The year 2021 marked the tenth anniversary of the earthquake and tsunami, and weengaged in reconstruction support activities under the project, despite the restrictions
imposed on external activities by the COVID-19 pandemic.

Local Communities

Sanki Engineering has concluded an agreement with Yamato City in Kanagawa
Prefecture to provide a temporary shelter for those unable to return home in thewake of a disaster. Under the agreement, Sanki Techno Center will, in the event of anearthquake or other calamity, serve as a base of operations for local disaster prevention
and emergency firefighting teams, and the Company will work to restore facilities
for water supply and sewage in Yamato City. We also offer the use of our facilities toraise disaster awareness in the community. In fiscal 2021, we held a safety experience
program at the Sanki Techno Center at the request of the Kanagawa Labor Bureau.

Sanki Environmental Garden

Social

Our employees are available for lectures and educational support outside the Company. In
the area of dispatching lecturers, we draw upon our business expertise to offer lectures on
construction and environmental engineering at Tokyo Zokei University. As for educational
support, we cooperated in the “Let’s Experience Heat” summer vacation event for parents
and children, hosted by the Japan Society of Mechanical Engineers, and provided hands-on
learning for 26 participating families.

Foundation of Sustainability Management

Our Approach to Local Communities

Since 2018, we have been an official sponsor of Yamato Sylphid, a women’s soccer
team in Yamato City. We also sponsor the non-profit organization Japan Deaf Rugby
Football Union (Deaf Rugby), Japan Handball Association, and East Hokkaido Cranes, an
ice hockey team in Kushiro City, Hokkaido Prefecture. Going forward, we will continue
to contribute to society by supporting sports while at the same time promoting thecreation of a working environment that encourages employees to proactively engage
with local communities.

Yamato Sylphid women’s soccer team on Sanki
Match Day in 2019

⨋ Donations and Contributions

Field trip to Kamaishi and Rikuzentakata
under the Earthquake Reconstruction
Project

We extend donations to universities and research institutes and sponsor culturalactivities by the Japan Philharmonic Orchestra, the Japan Chamber Music Foundation,and other institutions. We also support nature conservation activities in developing
countries in the Asia-Pacific region and other areas as well as the training of guide dogs
by continuously collecting donations for this cause and encourage our employees todonate blood at the head office. Moreover, our branches, branch offices, and Group
companies each take part in a variety of activities in which anyone can get involved,
such as donating used stamps and cards, as well as fixtures and food. We also help with
Mitsui Group social contribution activities through our support for the Mitsui Volunteer
Network, which promotes the voluntary efforts of retired, former employees of MitsuiGroup companies.

East Hokkaido Cranes• Purchased products from a gift catalog supporting the affected areas, in collaboration with theemployees union• Produced the video Record of the Great East Japan Earthquake—Sanki’s Response

72

SANKI REPORT 2022

SANKI REPORT 2022

73

Foundation of Sustainability Management | Governance

E

S

G

Environment

SocialGovernanceCorporate Governance▍Corporate Governance System (as of June 23, 2022)

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 our compliance with the
Corporate Governance Code and revise it as needed.
We are also taking appropriate action to comply with revisions made to the Corporate Governance Code in June
2021 and will continuously strive to achieve sustainable growth for the Group and strengthen its corporate value overthe medium to long term.

General Shareholders’ Meeting
Appointment/
Dismissal

Board of Company Auditors
5 auditors*2 including
3 external auditors

Liaison Meeting of External
Officers

Sanki Engineering Corporate Governance Guidelines

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

Board of Directors

Exchange of opinions,establishing common awareness(one substitute auditor)

5 external directors
3 external auditors

Appointment/
Dismissal

Appointment/Dismissal

Business auditing
Accounting auditing

Accounting auditing

Accounting Auditors

12 directors*1 including
5 external directors
Consultation(Ernst & Young ShinNihon LLC)
Reporting

Advisory Committee on
Nomination and Remuneration

Appointment/Dismissal

ReportingExecutive Officer Committee

Corporate Governance
Report (in Japanese)
https://www.sanki.co.jp/corporate/
governance/report.html

Monitoring, guidance, support, and education

12 (1)
5 (5)Executive officers (women)

37 (0)
5

Those also serving as directors
Auditors (women)

5 (0)
3 (3)

External auditors (independent auditors)▍Frequency of Major Meetings (FY2021)

74

Board of Directors

13*

100%

Board of Auditors

8

95.7%

Management Meeting

31−(attended by only internal officers)

SANKI REPORT 2022

Executive Officer Committee

The Board of Directors holds a meeting, led by the chairperson,
elected by and from among the directors, at least once a month todecide on important matters and supervise the status of executionof business affairs.

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.

* Mr. Keiji Kono and Mr. Akihiko Matsuda
were appointed external directors of
Sanki Engineering in June 2021 and haveattended 11 out of 11 meetings.

Corporate Ethics Committee
The committee consists of executive officers and is chaired by
the president. The executive officers responsible for corporate
ethics and nominated by the president oversee all mattersrelated to corporate ethics. The committee meets twice a year
to deliberate on implementation plans for the pervasion andobservance of the Code of Conduct and Action Guidelines.

Internal Audit Department

Internal Finance Control Committee

The department conducts internal audits of the execution ofoperations by business execution departments in accordancewith the Auditing Plan for that fiscal year. It verifies the internalmanagement system including its appropriateness and efficiency.
As necessary, it exchanges opinions with or makes proposals
concerning the improvement or correction of a problem to theinternal controls departments and reports the results of its audits
to the president and auditors.

The committee consists of the chairman, president, and executive
officers. It is chaired by the president and meets four times a
year, assuming a central role in Group-wide control, including
deliberation and decision-making concerning important mattersregarding internal controls for financial reporting.

Risk Management Committee

The committee, which meets as needed, consists solely of external
directors and deliberates on the nomination and remuneration ofcandidates for directors.

The committee consists of members of the Management Meetingand chairpersons of various subcommittees appointed by the
executive officer in charge of risk management. It meets fourtimes a year and oversees risk management for the entire Group.
Currently, the executive officer in charge of risk management is
the president.

Management Meeting

Sustainability Committee

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.

The committee, consisting of the president and representative
director and the directors, decides on key issues and measuresrelated to sustainable management.

Advisory Committee on Nomination and Remuneration

Average Attendance ofExternal Officers

Frequency

Auditing

Board of Directors

The board consists of auditors, by and from whom a chairperson is
selected, and meets at least six times a year to monitor the statusof governance and audits the execution of duties by directors
as an independent body entrusted by shareholders. Members
attend board and other important meetings, review the statusof operations and assets, and maintain close contact with theaccounting auditors, Internal Audit Department, and internal
controls departments. A supplementary external auditor has been
appointed to fill any future external auditor vacancies.

External director

External directors (independent directors)

Meeting

Leadership and supervision

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

Board of Company Auditors
Number of persons

Directors (women)

Internal Audit Department*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.

▍Summary of the Corporate Governance System (as of June 23, 2022)
Chairperson of the Board of Directors

Executive officers

Sustainability Committee

Policy Meeting

ReportingDiscussion, andreporting onimportant matters

Corporate GovernanceWe adopted a Company with Board of Company Auditors system with dedicated, fulltime auditors as our form of corporate governance. Under this structure, 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 aswell as the Board of Directors responsible for making decisions on material issues.
In addition, to increase management efficiency and simultaneously speed up thedecision-making process, we employ an executive officer system in which we divide
management functions between the Board of Directors responsible for decisionmaking and supervision functions, and the executive officers responsible for the
execution of business affairs.

Management Meeting
GovernanceInternal Finance Control
Committee⨋ Corporate Governance System

President

Discussion
and reporting

Corporate Ethics Committee

Corporate Governance System

Election, dismissal,
and supervision

Leadership andsupervision

Risk Management Committee

Foundation of Sustainability Management

Corporate Governance Guidelines

SANKI REPORT 2022

75

Foundation of Sustainability Management | Governance | Corporate Governance⨋ Bolstering Training for Officers

Principle
1-7

Formulation and disclosure of procedures for preventing
conflicts of interest with regard to transactions between
related parties

Article 9.3
Article 18.4

─●Supplementary Disclosure related to ensuring diversity with regard to
Principle 2-4.1 assignments and other treatment of core personnel

Article 14●●

Disclosure of efforts on personnel and management
to ensure that the corporate pension program is fully
functional, and management of conflicts of interest

Article 16─●(i) T he Company’s aspirations (business principles),business strategies, and business plans

─

●

●

(ii) Basic views and guidelines on corporate governancebased on the principles of the Corporate Governance
Code

Article 2●●(iii) P olicies and procedures for determining the
remuneration for executive managers and directors

Article 31─●(iv) Policies and procedures for selecting, dismissing,or nominating executive managers, directors, andcandidates for auditor

Article 18
Article 20
Article 21
Article 22
Article 24
Article 25─●(v) Reasons for selecting, dismissing, or nominating
individual executive managers, directors, andauditors

Article 23─●Supplementary Disclosure on initiatives on the sustainability of the
Principle 3-1.3 Company

Article 13
Article 17●●

Supplementary Disclosure of the scope and overview of matters
Principle 4-1.1 delegated to management

─

─

●

(Appendix)
Independence
standards forexternal officers

─●

Establishment of independent committees on
Supplementary
nomination and remuneration, and the involvement andPrinciple
advice of these committees in deliberations concerning
4-10.1
nominations and remuneration

Article 24─●Disclosure of policies and procedures related to:Supplementary identifying the skills required of directors; approach to
Principle
balancing the overall knowledge represented by the
4-11.1
Board of Directors, diversity, and scope; and combining
and selecting the skills and other qualities of directors

Article 19─●Disclosure of the time and effort taken to properly fulfil
Supplementary the roles and responsibilities of directors and auditors,
Principle
limits placed on holding concurrent positions at other4-11-2companies, and current status of concurrent positions
held by directors and auditors

Article 26─●Supplementary Disclosure of analysis and evaluation conducted by the
Principle
Board of Directors on the Board’s effectiveness, and4-11-3overall results

Article 29─●Supplementary
Principle
Disclosure of training policy for directors and auditors
4-14-2

Article 30─●Constructive response within reasonable limits by
the Board of Directors to shareholders’ requests for
dialogue, and approval and disclosure of the board’s
policies on promoting dialogue

Article 32─●⨋ Assessing the Effectiveness of the Board of Directors

The directors conduct an annual self-assessment to verify their deliberation process andidentify possible improvements as well as to analyze and evaluate the effectiveness ofthe process toward improving the effectiveness of overall governance. A summary of
the results is disclosed. In fiscal 2021, we conducted a non-anonymous self-assessment
questionnaire for all directors and auditors to evaluate the effectiveness of the Board of
Directors and exchanged opinions on the evaluation. The Board of Directors discussed
issues identified from analyzing the results of these questionnaires and the exchange of
opinions, as well as improvements to be made and the future direction.

Corporate Governance●*1 Company’s Corporate Governance
Guidelines*2 Company’s website*3 Company’s Corporate Governance Report

We appointed one female director to further strengthen our corporate governancestructure. Also, we conducted construction site visits and provided information to
deepen the understanding of our business among external directors and auditors.

Governance─

SANKI REPORT 2022

GovernanceFoundation of Sustainability Management

Disclosed Location
Website*2 Report *3

Article 10

Principle
5-1

76

Guideline*1

Formulation and disclosure of policies on crossshareholdings and concrete standards for exercising
voting rights

Formulation and disclosure of the Board of Directors’
independence standards for external officers, andselection of director candidates who are expected tocontribute to constructive discussions by the Board of
Directors

SocialAppointment of a Female Director

Principle
1-4

Principle
4-9

Environment

Efforts in Fiscal 2022

The principles required to be disclosed in the Corporate Governance Code are as follows.

Principle
3-1

G

We are strengthening our system in line with the Sanki Engineering Corporate
Governance Guidelines.

⨋ Compliance with the Corporate Governance CodePrinciple
2-6

S⨋ Strengthening the Effectiveness of the Governance System

We provide regular training for officers to enhance their knowledge. In fiscal 2021, we
conducted sustainability training for full-time officers and invited outside lecturers
to exchange views. In addition, we held inspection tours of our construction sites forexternal directors and external auditors.

Principle

E▍Overview of Effectiveness Assessment for Fiscal 2021

Issues identified

The issues extracted from the results of the self-assessment questionnaire and opinion
exchange meetings are as follows.
(1) Deepen discussion on mid- to long-term management strategies(2) Enhance training for directors and auditors

Futureinitiatives

Measures and future direction to improve the issues identified are as follows.
(1) P romote the Medium-Term Management Plan “Century 2025” Phase 3 and discuss businessconcepts beyond 2025
(2) Discuss ways to enhance sustainability(3) Discuss medium- to long-term human resource development(4) Provide directors and auditors with opportunities to systematically acquire knowledge(5) Provide external directors and auditors with opportunities to visit Company sites⨋ Appointment of Directors and Independence of External Officers

Sanki Engineering
Corporate Governance
Guidelines
https://www.sanki.
co.jp/en/corporate/
governance/guideline.
html

Our officers possess a wealth of work experience and knowledge as well as deep insightand 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 general shareholders’ meeting.
We have established standards on the independence of external officers to raise theobjectivity of their oversight of management.

Corporate Governance
Report (in Japanese)
https://www.sanki.co.jp/
corporate/governance/
report.html

SANKI REPORT 2022

77

Foundation of Sustainability Management | Governance | Corporate Governance▍Elements and Procedures for Remuneration for Directors and Auditors (as of June 27, 2022)▍External Officers’ Terms in Office and Reasons for Selection
Position

Name

Yukiteru
Yamamoto

Kazuhiko
Kashikura

External
Director

Keiji
Kono

External
Auditors

Shozo
FujitaYutakaAtomi

ToshiakiEgashira

●

●

●

4
years

1
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. He thus
possesses abundant operational experience and broad knowledge regarding
corporate management. The Company selected Mr. Yamamoto as an external
director for his experience and insight developed through this background.
Mr. Kazuhiko Kashikura has served as an executive officer of Sumitomo Mitsui
Banking Corporation and has managed several of its group companies as a top
executive. He thus possesses abundant experience and broad knowledge regarding
corporate management. The Company selected Mr. Kashikura as an external
director for his experience and insight developed through this background.

1
years

Mr. Akihiko Matsuda has served as an executive officer of Tokyo Gas Co., Ltd. andhas managed several of its group companies as a top executive. He thus possesses
abundant experience and broad insight across all aspects of energy-related
businesses. The Company selected Mr. Matsuda as an external director for his
experience and insight developed through this background.

ー*

Ms. Tamami Umeda is a licensed physician and has held positions suchas director-general counsellor, Ministry of Health, Labour and Welfare,and director-general, Environmental Health Department, Ministry of theEnvironment, and she thus has abundant experience and broad insight
regarding the health and hygiene and organizational management. The
Company selected Ms. Umeda as an external director for her experience andinsight developed through this background.

●

4
years

Mr. Shozo Fujita has served as a public prosecutor and attorney-at-law,
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. He thus possesses abundant experience and broad
insight. The Company selected Mr. Fujita as an external auditor for his experienceand insight developed through his background to audit the Company.

●

3
years

Mr. Yutaka Atomi has long been engaged in education and research atuniversities, serving in positions including president of Kyorin University. He
thus possesses deep insight and abundant experience regarding university
management. The Company selected Mr. Atomi as an external auditor for his
experience and insight developed through his background to audit the Company.

●

3
years

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

▍Skills, Careers, and Expertise*1 of Members of the Board of Directors and Board of Auditors (17 Persons)
Field

Number of Directors andAuditors (External Directors
and External Auditors)

Management
experience*2

8 (6)Finance and capital
markets

6 (4)Engineering

7 (1)Risk management

5 (2)

R&D

2 (0)

Governance

5 (2)Overseas operations

3 (1)

Law

1 (1)

⨋ Officer Remuneration

Number of Directors andAuditors (External Directors
and External Auditors)

Sanki Engineering has established the Advisory Committee on Nomination andRemuneration under the Board of Directors, to nominate candidates for directors and todeliberate on remuneration. To strengthen the transparency and neutrality of the committee,
we revised the composition in fiscal 2020, from a structure consisting of the president andexternal directors to one consisting of external directors only.
The remuneration for directors comprises, within the limits adopted by our generalshareholders’ meeting, of fixed remuneration, bonus, and restricted stock compensation.
We abolished the stock compensation-type stock option system and introduced a restricted
stock compensation system in fiscal 2022. Each fiscal year, we decide on amounts, with due
consideration for balancing each of the elements, in order to raise the level of motivation for
maximizing corporate value in tandem with the long-term interests of shareholders.

78

SANKI REPORT 2022

Directors (excluding
external directors)

◯

◯ *1

◯

External directors

◯

ー

◯

Auditors (excluding
external auditors)

◯

ー

◯

External auditors

◯

ー

◯

SocialGovernance

Composition of the Advisory
Committee on Nomination andRemuneration

Procedure
Determined by the Board of
Directors following deliberationby the Advisory Committee on
Nomination and Remuneration

Determined through consultation
among auditors

⿟Committee (report):
all external directors
⿟Individuals who provide
explanations:- President-D irectors appointed by thepresident and committee
members as necessary▍Remuneration for Directors and Auditors*2 in Fiscal 2021
Category

Mr. Keiji Kono, as a financial specialist, has held managerial positions in major
departments of the Bank of Japan. He has also served as an executive officer
at Chugai Pharmaceutical Co., Ltd., where he managed the IT management
department as the head of the division and promoted social contribution
activities overseas. He thus possesses a wide range of knowledge andexperience in those fields. The Company selected Mr. Kono as an external
director for his experience and insight developed through this background.

Field

Restricted Stock
Compensation

Environment

Persons Receiving Payment

Total Payment (Millions of Yen)

Directors (external directors)

13 (5)

513 (79)

Auditors (external auditors)

5 (3)109 (36)⨋ Internal Controls*Appointed in June 2022.

Independence Standards
for External Officers(Attachment for the SankiEngineering Corporate
Governance Guidelines)
https://www.sanki.co.jp/en/corporate/
governance/guideline.html*1 Two to three fields of particular strength
were selected.
*2 Experience as head of an organization,such as chairperson or president of acompany, chairperson of an organization,or president of a university.

• Basic Policy and Systems for Internal Controls
Under its Basic Policy on Internal Control System, Sanki Engineering is developing
and operating a system to ensure the legality, soundness, and transparency of its
operational execution. Moreover, we have established a whistleblowing system thatcomprises contact points for corporate ethics in general, dedicated contact points
for reporting violations of the Anti-Monopoly Act, and a system for reporting to thefulltime 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 to the execution ofoperations while also supervising to ensure the proper execution of operations. The
Management Meeting is held to ensure the effective execution of duties in accordancewith the rules for discussion and reporting. Moreover, for the free exchange of opinions,the Liaison Meeting of 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 theiropinions as necessary, receive reports from accounting auditors and the Internal Audit
Department, instruct that this department investigate and report on its findings ifneeded, 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, and exchanging
information.
• 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 by the
Financial Instruments Exchange Act of Japan. Moreover, we promote the establishment
and appropriate operation of an internal control system to safeguard the reliability of
our financial reporting by having the committee deliberate on the assessment andresponse with respect to the accounting 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 report for fiscal 2021, accounting auditors expressed their opinion that
our financial reports were presented in an appropriate manner in terms of all material
aspects.

Composition of Officer
Remuneration

⿟Fixed remuneration: paid
according to rank and scopeof responsibilities
⿟Bonus: portion linked toperformance during theperiod⿟Restricted stock compensation:
granted according to rank as
a long-term incentive*1 Excluding non-operational executive
officers.
*2 The number of officers covered includes
two directors who retired at theconclusion of the 97th Annual General
Meeting of Shareholders on June 23, 2021.

P.82

Corporate GovernanceTamami
Umeda

●

Bonus

G

Governance

AkihikoMatsuda

●

8
years

Fixed
Remuneration

Category

Reasons for Selection

S

Foundation of Sustainability Management

Independent Years
Officer Served

E

Whistleblowing
SystemSANKI REPORT 2022

79

Foundation of Sustainability Management | Governance | Corporate Governance

E

S

G

Environment

SocialGovernance

External● Directors

Representative
Director andChairman

Tsutomu
Hasegawa

Joined the Company in 1983. He engaged in the
Facilities Construction Business for many years. In
2018, he served in the key post of general managerof the Management Planning Office. He wasappointed representative director and president
in 2020 and has devoted his efforts to strengthen
the management foundation and promote the“Century 2025” long-term vision.

Director

Director

Director

Director

Joined the Company in 1972. He has many years ofexperience in operation and division managementof the Facilities Construction Business. Since
2017, he has served as general manager of the
Mechanical & Electrical Contracting Headquarters
and has made a focused effort to promote work
style reform and prevent industrial accidents atconstruction sites. He also leads the Labor Safety,
Health, Quality Management & Environment
Promotion Office.

Joined the Company in 1985. He gained abundant
experience as an engineer in the Facilities
Construction Business, including many overseas
assignments. Having served as general managerof the Facility Systems Division since 2014, he wasappointed general manager of the Sustainability
Promotion Division in 2021 and has been devoting
his efforts to promote sustainability and establish
compliance.

Joined the Company in 1984. Engaged in researchand development and in energy conservationrelated businesses. Appointed general managerof the Technology Research Institute in 2016 andhead of the R&D Center in 2018. He has served
as general manager of the Plants & Machinery
Systems Headquarters since 2021, contributing
to the development of the machinery systems
business and environmental systems business.

Joined the Company in 1982. He amassed awide range of operational experience as anengineer 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 was appointed
general manager of the General Affairs andHuman Resources Division in 2020 and has worked
to develop human resources and improve theworkplace environment.

Eiji
Mitsuishi

Masayuki
Kudo

Kazuaki
IijimaHirotoshi
Fukui

Corporate Governance

Chief Financial Officer

Hirokazu
IshidaChair of the Boardof Directors

Director

External Director

External Director

External Director

External Director

External Director

Joined the Company in 1984. He engaged inaccounting and finance-related operations and thepromotion of internal control. He has also served
as a manager responsible for the administration
departments, including general affairs and humanresources. He currently serves as general managerof the Accounting Division. Since 2020, he has
concurrently served as chief financial officer and has
focused his efforts on capital and financial policies.

Served in positions including representative
director and president of Mitsui Life Insurance
Company Limited and was also active as an
executive member of the Policy Board of the Japan
Business Federation. He was appointed external
director of the Company in June 2014 and has alsochaired the Board of Directors since 2020.

Served as an executive officer of Sumitomo Mitsui
Banking Corporation and as chief executive of
its group companies. Since 2018, he has been an
external director of the Company.

Held managerial positions in major departmentsof the Bank of Japan. From 2010, he served as
an executive officer at Chugai PharmaceuticalCo., Ltd., heading the IT Supervisory Divisionand promoting social contribution activities. He
was appointed external director of the Company
in 2021.

Served as an executive officer and advisor of Tokyo
Gas Co., Ltd. and managed several of its groupcompanies as a top executive. He was appointed
external director of the Company in 2021.

Served in positions such as director-general
counsellor for medical policy and mental healthcare, Ministry of Health, Labour and Welfare, anddirector-general of the Environmental Health
Department, Ministry of the Environment, andaccepted the post of visiting researcher at the
National Center for Global Health and Medicine in
2021. She was appointed external director of theCompany in 2022.

Full-time Auditor

Full-time Auditor

External Auditor

External Auditor

External Auditor

Joined the Company in 1974. He engaged in
the technical field of the Facilities Construction
Business. He gained experience in department
management and served as the manager oftechnical administration departments in the Facilities
Construction Business. After serving as generalmanager of technical administration starting in 2014,
he was appointed full-time auditor in 2020.

Joined the Company in 1983. Spent many years in
the accounting and financial divisions. Served as
general manager of the Internal Audit Department,
CSR Promotion Division since 2013, focusing on legal
compliance and other areas. He was appointed fulltime auditor in 2022.

Became a prosecutor in 1976 and registered as alawyer in 2011. He served in positions including
representative director and president of The
Resolution and Collection Corporation and as adirector serving as audit and supervisory committee
member of other companies. He was appointed
external auditor of the Company in 2018.

Long involved in education and research at auniversity, he served as dean of the faculty of
medicine at Kyorin University from 2004 andpresident from 2010, and is currently its honorarypresident. He was appointed external auditor of theCompany in 2019.

Has served in positions including president andchief executive officer of Mitsui Sumitomo Insurance
Company, Limited. He was appointed external
auditor of the Company in 2019. As a significant
concurrent position, he serves as a special advisor to
Mitsui Sumitomo Insurance Company, Limited.

YoshioKawabeYukiteru
Yamamoto

Governance

Joined the Company in 1975. He has many yearsof experience in the division management of
the Facilities Construction Business and Sales
Administration Division. He assumed the postof representative director and president in 2015and has served as representative director andchairman since 2020.

Representative
Director and President

Foundation of Sustainability Management

Executives of the Sanki Engineering Group（as of June 27, 2022)

Kazuhiko
Kashikura

Keiji
Kono

AkihikoMatsudaTamami
Umeda● Auditors

Kazuo
Saito

80

SANKI REPORT 2022

Kunihiko
Tachi

Shozo
FujitaYutakaAtomi

ToshiakiEgashira

SANKI REPORT 2022

81

Foundation of Sustainability Management | Governance

E

S

G

Environment

SocialGovernanceCompliance▍Whistleblowing System
Full-time auditor

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.
S ank i Engine er ing Gr oup Compliance D e clar ation, S ank i
Engineering Group Conduct Standards

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

Board of Directors

Foundation of Sustainability Management

Basic Philosophy

ReportReportOfficers responsible forcorporate ethics
ReportSecretariat (Sustainability Promotion Division)

ReportExternal hotline(consulting
attorney)If the person wants to report

Consulting Office for Harassment andOther Concerns (professional counselor
outside the Company)

Corporate Ethics Hotline

Womeńs Hotline

Fair Trade Hotline

Repor t and Consultation

Compliance Promotion System

P.75
Corporate Governance System⨋ Whistleblowing System

In order for all Group executives and employees to refresh their awareness of the
responsibilities they must fulfill in their respective positions and roles, complianceconfirmation sheets covering items such as observance of the Code of Conduct andAction Guidelines, and eliminating anti-social forces, are submitted at the beginning ofeach fiscal year.
▍Number of People Submitting Compliance Confirmation Sheets (Fiscal 2022)

We set up the Corporate Ethics Hotline for reporting on compliance-related issues, theFair Trade Hotline for reporting on violations of the Anti-Monopoly Act, the Women’s
Hotline for accepting consultations from women, and the Consulting Office forHarassment and Other Concerns. The full-time auditor and Sustainability Promotion
Division are responsible for the internal hotlines, while our consulting attorney’s officeand external services entrusted by the Company are responsible for the external
hotlines. We act swiftly to resolve the issues that are reported, with due consideration
for the protection of anyone seeking consultation or providing information inaccordance with the Corporate Ethics Regulations. All reported information is presented
to the executives responsible for corporate ethics, and important information isreported to the Board of Directors. In fiscal 2021, there were 17 reported incidents (16internally and 1 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 will not be placed
at a disadvantage for consulting or reporting to the hotline. To raise awareness of thesystem, we provide related information in the Sanki Engineering Group Sustainability
Handbook, which is distributed to all Group employees. The hotline is also available tobusiness partners, and the Company provides contact information.

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

39

Compliance confirmation sheets*2

2,103 (2,137)

Sustainability Handbook

Fair Trade Hotline

0

Women’s Hotline

1

Consulting Office for Harassment and Other Concerns

1

SANKI REPORT 2022(39)

460 (465)⨋ Corporate Ethics Training

Sanki Engineering conducts corporate ethics training for all employees on a regularbasis in order to ensure thorough compliance with the Code of Conduct and Action
Guidelines. Separate special training is provided for mid-career hires when they join the
Company and for new sales representatives when they start their new positions.

Poster Promoting theWhistleblowing System▍Results of Corporate Ethics Training (Fiscal 2021)

Number of Reports

15

39*1 Directors and executive officers submit
compliance confirmation sheets related
to the execution of operations.
*2 Individuals who did not submit
compliance confirmation sheets wereunable to do so due to reasons such as
maternity leave and medical treatment.

We clearly state that severing relationships with antisocial forces is a condition for doing
business with our partners and ask them to submit a Letter of Intent Regarding theElimination of Antisocial Forces. As of March 31, 2022, we have received the letter from acumulative total of 3,375 companies.

Target▍Number of Reports in Fiscal 2021
Corporate Ethics Hotline(39)

Group Companies(Target Employees)⨋ Response to Antisocial Forces

Theme

82

Compliance

Compliance Promotion Activities

Governance⨋ Compliance Confirmation Sheets from All Executives and Employees

We have established a Corporate Ethics Committee, chaired by the president, whonominates officers responsible for corporate ethics to oversee the committee’s
activities. In principle, it meets twice a year to review, monitor, and provide guidancewith respect to compliance guidelines and action plans for the entire Group.

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

Compliance with the AntiMonopoly Act

All Group executive officers
and employees

Frequency and Participation(Attendance Rate)

10 sessions
2,617 employees(99%)*

Mid-career hires

11 employees(100%)

Newly assigned sales staff

16 employees(100%)* Individuals who did not participate intraining were unable to do so due toreasons such as maternity leave andmedical treatment.

SANKI REPORT 2022

83

Foundation of Sustainability Management | Governance | ComplianceFoundation of Sustainability Management | GovernanceRisk Management⨋ Compliance Awareness Survey⨋ Compliance Audit

The Internal Audit Department seeks to strengthen compliance by providing guidanceon audits. In fiscal 2021, internal audits were carried out at 18 worksites, including 14
sites and 4 subsidiaries in Japan. In addition, we conducted hearings with site managers
by visiting construction sites and via web conferencing to foster compliance awareness.

Initiatives for Preventing Bribery⨋ Ongoing Measures for Recurrence Prevention

The following are key measures on reinforcing compliance that we undertook between
fiscal 2013 and fiscal 2021. Applying the results of the compliance awareness survey, we
will continue our Group-wide effort to prevent violations of the Anti-Monopoly Act infiscal 2022.

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 case they do.

Q Do you think that complianceconscious behavior has
permeated our company?

⿟Yes.
⿟Somewhat.
⿟I’m leaning toward “no”
here.

33%
60%
5%

Q Please answer all of thefollowing that apply to yourcurrent working environment.
(Multiple answers areallowed.)⿟I think that personal
relationships in theworkplace are relatively 66%
good.
⿟It seems easy to take56%
various kinds of leaves.
⿟Your supervisor is willingto listen to your opinions 47%
and suggestions.

Q What do you think isimportant for creating aworkplace that is less prone
to compliance violations?
(multiple answers allowed)

⿟Improving personal76%
morals and awareness⿟Improving
communication in the50%
workplace
⿟Eliminating work overload 44%
and understaffing

Risk Management Promotion System
We set up the Risk Management Committee, chaired by a risk management officer, tocentrally manage Group-wide risks and implement an organized response. The committeemonitors important risks throughout the Group, formulates a control plan, and monitors
risks reported by subcommittees and divisions. 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 October 2021, we recognizedclimate change as a risk to our business and established a Climate Change Risk Subcommittee
to manage related risks. Moreover, the Internal Audit Department conducts regular audits tocheck the status of risk management at each division and verify the appropriateness of risk
management.
▍Framework of the Risk Management System (as of June 27, 2022)
President
ReportReportReportAudit

Training and Education

�	Formulated the Sanki Engineering Group Compliance Declaration and Sanki Engineering Group
Conduct Standards
�	Issued and revised the Compliance Handbook�	Issued and revised the Anti-Monopoly Act Compliance Manual�	Clearly stipulated breaches of laws such as the Anti-Monopoly Act as grounds for disciplinary action

�Submitted compliance commitment
letters
�Raised awareness of compliance-related
hotlines
�Top management visited all businessbases to hold corporate ethics training
sessions through direct exchange withall Group executives and employees
�H e l d s p e c i a l t r a i n i n g o n t h e A n t i Monopoly Act for newly assigned sales
staff and mid-career hires
�Conduc ted e -learning on the AntiMonopoly Act for all employees

Structural Reinforcements�	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 division and began supervising the process for deciding
the bid amount for public works and operating a system of advance application and reporting whenattending 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�	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 and sought
awareness among employees

84

SANKI REPORT 2022

Management Meeting
Discussion on policy torespond to important risks

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

Report findings of deliberations

Risk Management Committee

Internal Audit Department

Policies and Manuals

Risk Management

Reinforcing Compliance with the Anti-Monopoly Act

Survey period: June 2022
Participants: all Group executive
officers and employees

Basic Philosophy

Governance

We are working to prevent corrupt practices under the Sanki Engineering Group Action
Guidelines, which prohibits bribing public officials and providing benefits such as
excessive business entertainment. In addition to establishing a program specificallyrelated to bribery as part of our corporate ethics training, we provide e-learning for all
employees.

Excerpts from the Results of theCompliance Awareness Survey
for 2022

Foundation of Sustainability Management

We conduct an annual awareness survey on issues such as compliance andsustainability, targeting all executive officers and employees.
The survey includes questions on harassment related to the workplace, customers,
and business partners. Survey results are disclosed to all Group executive officers andemployees and used to monitor and improve the effectiveness of our sustainability
activities and identify human rights risks.

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

MonitorReport status

Subcommittees

ReportMonitor《Committees and Management System》

MonitorCustomer

Finance

Quality

Supplier

Information
security

SafetyLegal

Overseas

Labor

ComplianceManagement(public relations)
Climate change
riskCentral Disaster Countermeasures
Committee
Corporate Ethics Committee
Internal Finance Control Committee
Management review of EMS and QMS
Central Safety and Health Committee
BCMS Promotion Committee

Risk Management Activities⨋ Risk Management Response

Each fiscal year, the Risk Management Committee identifies risks that affectbusiness activities and stipulates priority risk items for the next fiscal year. The
committee monitors risks using reports submitted by the risk management
subcommittees and identifies necessary countermeasures, provides instructions,and confirms progress.
In fiscal 2021, the committee convened four times to review the monitoring
indicators and structure of the subcommittees. In addition, it discussed andaddressed various issues such as risks linked to climate change, confirmation ofsafety in times of disaster, risks associated with the Olympics and Paralympics,
SANKI REPORT 2022

85

Foundation of Sustainability Management | Governance | Risk Management▍Fiscal 2021 Operational Policy for Risk Management
PolicyOutlineCoordination with BCMS

Establish a system to coordinate with the Business Continuity Management System(BCMS), which will be created in fiscal 2021.

Company-wide Risk
Management Committee

Hold an expanded Risk Management Committee meeting, not only for membersof the Risk Management Committee but also for all executive officers, to further
disseminate risk management across the Company and ensure a smooth start for the
newly established BCMS.

⨋ Risk Management Associated with COVID-19

⿟Business Operation Risks- Common to all construction
businesses
Securing human resources
Increase in materials and laborcosts and delays in delivery ofmaterials and equipment
Overseas business risks
Accidents and disasters during
construction
Unprofitable construction- Facilities Construction
Business
Overabundance of planned
projects and response to global
challenges- Machinery Systems Business
Decrease in capital investment
Decline in competitiveness- Environmental Systems
Business
Changes in market conditions
Long-term business risks- Real Estate Business▍Risks and Opportunities Posed by COVID-19 to Business Activities• Contraction in capital investments due to economic stagnation•D ecline in demand for office buildings in central urban areas due to the spread of teleworking• Deterioration in profit and loss due to construction delays and other factors

Opportunities• Growing demand for ICT facilities and medical and pharmaceutical facilities• I ncreased need for investment in improving office environments and review of workspaces
due to changing work styles• Need for unmanned operations to prevent the spread of COVID-19

Responding to Disaster Risks with a BCPThe Sanki Engineering Group’s business continuity plan (BCP) aims to ensure
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 restorationin collaboration with business partners. In response to Risk Management
Committee suggestions on strengthening the risk management system, weestablished a BCMS in fiscal 2021 as a mechanism for the effective maintenanceand management of the BCP.
Under the BCMS, we set an annual plan to periodically review the BCP
through PDCA activities (business impact analysis, education, training, internal
audits, management review, review, and improvement) and began operating
the system in April 2022. In conjunction with this, we reviewed the events
assumed in the BCP, and based on the Common Version, which describes ourbasic response policy, we formulated risk-specific response guidelines for eachof the six events: natural disasters, infectious diseases, industrial accidents,
cyberattacks, terrorism, and misconduct, to realize a system for rapid businessrecovery and maintenance.
Furthermore, prior to the Tokyo Olympic and Paralympic Games, we
conducted a Company-wide counter-terrorism drill in June 2021, a Companywide initial response exercise in October for a large-scale earthquake, and a drill
in February 2022, for a Nankai Trough earthquake, that was organized by the
emergency response headquarters.
We will strive to strengthen our ability to respond to risk so that everyone
involved with the Sanki Engineering Group, including shareholders, investors,
86

SANKI REPORT 2022

⿟Financial and Other Risks

Customer credit risk
Stock market fluctuations
Interest rate fluctuations
Risks related to litigation, etc.
Seasonal fluctuations in businessperformance
Legal violations
War, terrorism, and natural disasters
Climate change
Infectious disease epidemic
Confidentiality and personal
information leakage
System failure

Annual Securities Report for the
98th Business Term (from April
1, 2021 to March 31, 2022) inthe “Business and Other Risks”
Section (pages 17–19)(in Japanese)
https://www.sanki.co.jp/ir/library/doc/
securities_R3-4q.pdf

Environment

SocialGovernancecustomers, subcontractors, business partners, and local communities, can feelsecure.

Strengthening Risk Management in Overseas Operations
We have formulated the Risk Management Manual for Overseas Operations for thehead office and overseas bases as well as the Manual to Ensure Safety in Foreign
Countries for overseas employees, those traveling overseas on business, andtheir families, and we review and revise them every year. In addition, our auditors
concurrently serve as auditors of Group companies, and we are working to improve
our Group management system, including at overseas sites.

Risk Management Manual for
Overseas Operations

Initiatives on 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 2021, we held three subcommittee meetings, and we also
upgraded security software and revised guidelines for ensuring information security.
In addition, we use checklists in a thorough assessment of the status of information
security measures during onsite inspections by supervisors at each branch and branch
office.
▍Key Information Security Measures
Type

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

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

Prevention ofunauthorized use• I D and password management, and security measures for entering and exiting
rooms• Confirmation using asset management tools• P reventing non-Company-owned PCs brought into the office from being
connected to the in-house network

Measures against
external threats• A ntivirus measures and automatic updating of security patches (once a month)• Web filtering and countermeasures against unsolicited emails• Monitoring of illegal outbound data streams• I nstallation of security software capable of detecting malware intrusion at an
early stage

Measures for social media

BCP drill• Instill an understanding among Group employees based on guidelines• Improving the level of security regarding social media

⿟Response rules andprocedures to be followed by
the head office and overseas
bases in the event of a crisis
overseas
⿟Risks to physical well-being
and life, violation of laws andregulations, response to mass
media, litigation, etc.
Manual to Ensure Safety in
Foreign Countries

⿟A practical guide on risk
avoidance and emergency
response for employees
working overseas
⿟Actions required in theevent of a terrorist attack
or disaster, prevention ofdamage from crime and otherrisks, compliance with anticorruption and other laws,
personnel/labor managementof locally employed staff,
religion, and other related
matters

Risk Management

Risks

Rent fluctuations
Decline in occupancy rateG

GovernanceIn response to the COVID-19 pandemic, we established the COVID-19 Task Force in April
2020 and have been implementing countermeasures as the situation evolves. Also, theRisk Management Committee conducts regular monitoring.

Major Business Risks

S

Foundation of Sustainability Management

COVID-19 risks, and reporting procedures in the event that a serious risk arises.
Furthermore, we established an operational policy and brushed up on the details of
our initiatives.

E

Information Security Rules
and Standards

⿟Information Security
Management Rules
⿟Information System Usage
Standards
⿟Information Security Risk
Management Standards
⿟Information Security Risk
Countermeasure Standards

SANKI REPORT 2022

87

Foundation of Sustainability Management | GovernanceFoundation of Sustainability Management | Governance

Human Rights

Dialogue with Shareholders
and Investors
Basic Philosophy

In April 2022, the Sanki Engineering Group established the Sanki Engineering Group Human Rights Policy based on the
Sanki Engineering Group Code of Conduct and Action Guidelines. Under the policy, we will respect the human rights
of all people in all our business activities, including throughout the supply chain, eliminate discrimination and acts that
undermine individual dignity, and conduct human rights due diligence (identifying, preventing, and addressing impacts
on human rights).

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 Sanki Engineering
Corporate Governance Guidelines, established in December 2015. We are resolved to fulfill our responsibilities toshareholders and investors by following these guidelines.

Sanki Engineering Group Human Rights Policy

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

Sanki Engineering Group Code of Conduct and Action Guidelines

https://www.sanki.co.jp/en/csr/policy/conduct-code.html

Information Disclosure Based on Our Disclosure Policy
As stated in our Disclosure Policy, Sanki Engineering is committed to the timely andappropriate disclosure of corporate information. We proactively disclose information
beyond legal mandates when we deem it to be useful to shareholders and investors
and in order to ensure management transparency.

⨋ Reinforcing the Dissemination of Information

Addressing Human Rights Issues in the Workplace
The Sanki Engineering Group Human Rights Policy declares our commitment toensure that no member of our organization will be discriminated against on thebasis of nationality, gender, age, disability, or other factors. In addition to formulating
guidelines for preventing harassment, we seek to understand the opinions and issues
related to harassment from responses to the Compliance Awareness Survey as well as
any concerns that have been reported. We continuously provide employee training toprevent and eradicate harassment.

P.84

Compliance Awareness
SurveyTo ensure that all employees can seek advice on issues related to human rights, we haveestablished a hotline for workplace-related concerns, a counter staffed by qualified
external counselors, and a Women’s Hotline staffed by female counselors. Reporters will
not be placed at a disadvantage for consulting or reporting issues and any personallyidentifiable information will be protected.
Consultation services are also available to business partners, and the Company
provides contact information.

P.82

Whistleblowing System

88

SANKI REPORT 2022

From the standpoint of preventing the spread of COVID-19, we accepted questions via
the corporate website ahead of the general meeting of shareholders, which was also
livestreamed.
We engage our investors by holding results briefings for analysts and institutional
investors, as well as individual IR meetings throughout the year (35 times in fiscal
2021). We also periodically conduct shareholder surveys, and the needs and opinions
identified through such dialogue with shareholders and investors are regularlypresented to the Board of Directors and the Management Meeting. We will continue toencourage interactive dialogue beyond one-way messaging.

Investor Relations Website

Video of the General Meeting of
Shareholders⨋ Obtained an AA Rating in the ESG/SDGs Assessment Loan Scheme

Human Rights Training
To deepen understanding of respect for human rights among all employees, we
provide learning opportunities during corporate ethics training and internal training
held in each division. We also hold study sessions on remote harassment, which
may become a concern due to the introduction of telework to prevent the spread of
COVID-19.

https://www.sanki.co.jp/en/ir/library/doc/
century_2025_phase3.pdf

We are working to enhance our IR activities to reinforce our dissemination of
information, a key initiative laid out in the Medium-Term Management Plan “Century
2025” Phases 2 and 3. We foster a better understanding of the Company amongshareholders and investors by making use of current methods for disseminating
information and enhancing content, such as by posting videos of business reports andexplanations of issues to be addressed on our website prior to the general meeting ofshareholders.

⨋ Communication with Shareholders and Investors

Consultation Service for Human Rights Issues

Medium-Term Management
Plan “Century 2025” Phase 3(FY2022–2025)

Risk Management / Dialogue with Shareholders and Investors

The Risk Management Committee (Compliance Risk Subcommittee), chaired by thepresident, will identify human rights risks among the managed risks and discuss
monitoring them. In addition, the Corporate Ethics Committee, also chaired by thepresident, monitors compliance-related matters.

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

Governance

Human Rights Promotion System

Sanki Engineering Corporate Governance Guidelines

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

Foundation of Sustainability Management

Basic Philosophy

P.83

Corporate Ethics Training

Sanki Engineering obtained an AA rating, the second highest on a seven-point
scale, for the third consecutive year, for an ESG/SDGs Assessment SyndicatedLoan 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 ourrecognition further as a company that excels in its initiatives and disclosure related
to ESG and to realizing the SDGs.

Sumitomo Mitsui Banking Corporation
ESG/SDGs Assessment Loan

SANKI REPORT 2022

89

Financial Report and Corporate Information

Financial Report(Millions of yen)

Year ended March 31,
2012

Year ended March 31,
2013

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

Year ended March 31,
2017

Orders received

175,291

165,800

168,295

Balance carried forward

100,272

111,414108,219

173,398

183,270

185,880

102,019

106,388

123,756

Net sales

147,994

154,658

171,496

179,598

178,901

168,512Selling, general and administrative expenses

15,712

15,19915,60415,015

16,419Operating profit

2,525

2,391

2,818

2,951

Ordinary profit

2,268

2,680

3,146

3,809

Profit attributable to owners of parent*

176(4,992)

1,763

2,461

5,327

Cash flows from operating activities(2,697)

9,729(9,403)

(139)

5,220

Cash flows from investing activities(1,046)(9,481)(3,506)

3,440

5,520

Cash flows from financing activities(280)(1,028)(4,152)(2,901)(1,826)

Cash and cash equivalents at end of period

41,09740,36723,51023,66732,501

Total assets

163,120

166,477

170,181

176,382

Net assets

79,662

76,932

74,91784,869Number of employees

2,289

2,246

2,283

2,282

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

Year ended March 31,
2021

Year ended March 31,
2022

191,113217,096

194,018

195,580

202,250

144,712

149,495

136,163

141,676

150,737

170,157

212,314207,684

190,067

193,189

16,526

18,466

21,046

21,436

21,255

21,110

6,509

6,012

6,593

10,637

10,674

7,498

9,112

8,135

6,880

7,434

11,204

11,224

8,196

9,817

4,698

3,906

9,046

7,576

5,901

6,489

10,845

6,306

6,786

11,940(483)

18,529(1,644)(2,510)(3,775)(303)(1,423)(3,384)(2,458)

1,814(5,215)(8,955)(6,974)(7,518)39,18744,866

42,61245,94637,08744,779169,423

166,612

177,014

195,321

180,805

171,313

183,60984,55785,961

86,191

89,77287,364

91,69994,278

2,309

2,339

2,384

2,394

2,501

2,548

2,607

Fiscal year

As of end of fiscal year under review

Financial Report

Year ended March 31,
2016

Financial Report and Corporate Information

11-year Consolidated Financial Summary

Per share information
Earnings per share (yen)Book-value per share (yen)Cash dividends (yen)2.46(71.04)

26.46

38.30

83.84

73.91

63.02

150.02128.51103.12115.13

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

1,611.76

1,685.20

15.00

15.00

15.00

20.00

30.00

30.00

35.00

60.00

95.00

80.00

85.00

Other information
Equity ratio (%)

48.8

46.2

44.0

48.1

49.8

51.5

48.6

45.8

48.2

53.4

51.2

Return on assets (%)

1.4

1.6

1.9

2.2

4.7

4.1

4.3

6.0

6.0

4.7

5.5

Return on equity (%)

0.2

(6.4)

2.3

3.0

6.3

5.5

4.5

10.3

8.6

6.6

7.0

* The revised Accounting Standard for Business Combination and other standards have been applied
since fiscal 2015. Accordingly, “Profit 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 2010 and fiscal 2014.

(Left axis) ● Orders received● Net sales(Right axis) ■ Operating profit■ Ordinary profit■ Profit attributable to owners of parent

Orders received and Net sales

300,000
250,000(Millions of yen)
Profit■ Change in Dividend Per Share and Consolidated Payout Ratio*(Left axis) ■ Annual dividend per share(Right axis) ■ Consolidated payout ratio

20,000(Yen)

100

15,000200,000

600

80

10,000150,000

(%)

620

580
60
80

100,000
5,000
50,000

40

60
40

20

20

0

0

0

-50,000-5,000

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

（FY）

0

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

-100,000-150,00090

2011

SANKI REPORT 2022

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

(FY)

-10,000

SANKI REPORT 2022

91

Financial Report and Corporate Information

Consolidated Balance Sheet(Millions of yen)
As of March 31, 2021
Assets

As of March 31, 2021

As of March 31, 2022

Liabilities:
Current liabilities:¥36,087¥42,779

Electronically recorded obligations - operating¥873¥2,588987

595

Accounts payable for construction contracts

40,83637,932

Electronically recorded monetary claims - operating

6,487

7,124

Short-term borrowings

7,135

8,885

Accounts receivable from completed construction contracts and other

64,61039,412

Lease obligations

133

94

—

19,629

Income taxes payable

840

2,659

Securities

2,999

5,999

Advances received on construction contracts in progress

Costs on construction contracts in progress

2,343

2,921

Contract liabilities

Cash and deposits
Notes receivable - trade

Contract assets

Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets

493

756

2,057

6,541

(12)

(17)

116,054

125,742

Non-current assets:
Property, plant and equipment:

43,830

Accumulated depreciation(33,445)(34,123)

Buildings and structures, net

10,148

9,707

Machinery, vehicles, tools, furniture and fixtures
Accumulated depreciation
Machinery, vehicles, and tools, furniture and fixtures, net
Land
Lease assets

2,025

2,028

(1,621)(1,630)

404

398

3,107

3,085

539

542

Accumulated depreciation

(250)

(230)

Leased assets, net

289

311

Construction in progress22

1

13,972

13,504

Total property, plant and equipment

Intangible assets:––

14,754

3,792

4,143

Provision for directors’ bonuses

230

234

Provision for warranties for completed construction

788

1,289

–

9

Other

4,671

6,617

Total current liabilities

67,882

79,2103,460

320Provision for loss on construction contracts

Noncurrent liabilities:
Long-term borrowings

274

325

Retirement benefit liability

1,710

2,581

Provision for loss on business of subsidiaries and associates

300

440

Deferred tax liabilities

285

670

5,701

5,784

Lease obligations

Other
Total noncurrent liabilities
Total liabilities

11,731

10,121

79,61489,331

8,105

Net assets:
Shareholders’ equity:
Share capital

8,105

Capital surplus

4,181

4,181

Retained earnings

73,15875,097

Other

937

1,255

Treasury shares(3,859)(5,243)

Total intangible assets

937

1,255

Total shareholders’ equity

81,58582,14028,81630,447

10,853

12,116Long-term loans receivable

85

73

Retirement benefit asset

5,233

6,303

Foreign currency translation adjustment

Leasehold and guarantee deposits

1,456

1,466

Remesurements of defined benefit plans

(908)

(265)

873

1,252

Total accumulated other comprehensive income

9,831

11,827

Investments and other assets:
Investment securities

Insurance funds

Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

786

821

Other

3,516

3,160

Shares acquisition rights

Allowance for doubtful accounts

(419)

(419)

Total net assets

Total investments and other assets

40,348

43,10655,25857,866¥171,313¥183,609

Deferred tax assets

Total non-current assets
Total assets

SANKI REPORT 2022

Financial Report

43,594

Buildings and structures

Provision for bonuses

8,580

Financial Report and Corporate Information

Current assets:

92(Millions of yen)

As of March 31, 2022

Total liabilities and net assets

2

(5)

(116)

(19)

282

310

91,69994,278¥171,313¥183,609

SANKI REPORT 2022

93

Financial Report and Corporate Information

Consolidated Statement of Income and Comprehensive Income

Consolidated Statement of Changes in equity(Millions of yen)

Fiscal year ended March 31, 2021

Fiscal year ended March 31, 2021

(Millions of yen)

Fiscal yearended March 31, 2022
Shareholders’ equity

Net sales:

Total net sales
Cost of sales:
Cost of sales of completed construction contracts
Cost of sales on real estate business and otherTotal cost of sales¥190,646
2,542
193,189

159,793
1,519
161,313

161,430
1,535
162,965

27,765988
28,75429,216
1,007
30,223

7,591
1,613
230
684
—
1,079
10,055
21,255
7,498

7,750
1,771
234
495
3
969
9,886
21,110
9,112

19
521
247
109
170
1,068

15
560
112
175
184
1,047

113
63
160
370
8,196

112
86
144
342
9,817

–
¥–

50
¥50

¥1
79
19
68
–
231
399
7,797
2,232
(336)
1,895
¥5,901

¥22
114
77
–
140
–
354
9,514
3,512
(487)
3,024
¥6,489¥5,901¥–¥6,489¥–¥3,579
2
63
1,378
5,023
¥10,924¥1,263
(7)
97
643
1,995
¥8,485¥10,924¥–¥8,485¥–Gross profit:
Gross profit on completed construction contracts
Gross profit on real estate business and otherTotal gross profit
Selling, general and administrative expenses:
Employees’ salaries and allowances
Provision for bonuses
Provision for bonuses for directors (and other officers)
Retirement benefit expenses
Provision of allowance for doubtful accounts
Depreciation
Other
Total selling, general and administrative expenses
Operating profit
Non-operating income:Interest income
Dividend income
Insurance claim income
Waste disposal income
Other
Total non-operating income

Balance at beginning of period
Changes during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Disposal of treasury shares
Transfer of loss on disposal of treasury shares
Cancellation of treasury shares
Net changes in items other than shareholders’ equity
Total changes in items during period
Balance at end of period

Share capital¥8,105

Capital surplus¥4,181Retained earnings¥74,155

Treasury shares
Total shareholders’ equity¥ (4,187)¥82,254(5,474)
5,901

1,383

(996)
¥73,158328¥ (3,859)(668)¥81,585(1,171)
116

(40)
40

−
¥8,105(40)(1,383)(5,474)
5,901(1,171)75−−−¥4,181

Accumulated other comprehensive income

Balance at beginning of period
Changes during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Disposal of treasury shares
Transfer of loss on disposal of treasury shares
Cancellation of treasury shares
Net changes in items other than shareholders’ equity
Total changes during period
Balance at end of period

Valuation difference
on available-for-salesecurities

Deferred gains orlosses on hedges¥7,274

−

3,579
3,579
¥10,853

Foreign currencytranslation
adjustment¥ (179)

2
2
¥2

63
63
¥ (116)

Remeasurementsof defined benefitplans¥ (2,286)

1,378
1,378
¥ (908)

Total accumulated
othercomprehensive
income¥4,807

Shareacquisitionrights

5,023
5,023¥9,831

Total net
assets¥302¥87,364

(19)
(19)
¥282

(5,474)
5,901(1,171)
75
−
−
5,003
4,334
¥91,699

Financial Report¥187,559
2,507
190,067

Financial Report and Corporate Information

Net sales of completed construction contracts
Net sales of real estate business and other

Non-operating expenses:
Interest expenses
Construction repair expenses
Other
Total non-operating expenses
Ordinary profit
Extraordinary income:Gain on sale of investment securities
Total extraordinary income
Extraordinary losses:
Impairment losses
Loss on retirement of non-current assets
Loss on valuation of investment securities
Office relocation expenses
Provision for loss on business of subsidiaries and associates
Compensation for damage
Total extraordinary losses
Profit before income taxes
Income taxes-current
Income taxes-deferred
Total income taxes
Profit(Breakdown)
Profit attributable to owners of parent
Profit attributable to non-controlling interests
Other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total other comprehensive income
Comprehensive income

Fiscal year ended March 31, 2022

(Millions of yen)
Shareholders’ equity

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

Share capital¥8,105

Capital surplus¥4,181–¥8,105Retained earnings¥73,158

Treasury shares
Total shareholders’ equity¥ (3,859)¥81,585(4,537)
6,489(4,537)
6,489(1,438)41–(1,438)
55

(13)
13

(13)

–
¥4,181

1,938¥75,097(1,383)¥ (5,243)555¥82,140

Accumulated other comprehensive income

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

Valuation difference
on available-for-salesecurities

Deferred gains orlosses on hedges

Foreign currencytranslation
adjustment

Remeasurementsof defined benefit
plans¥10,853¥2¥ (116)¥ (908)

1,263
1,263
¥12,116

(7)
(7)
¥ (5)

97
97
¥ (19)643
643¥ (265)

Total accumulated
othercomprehensive
income¥9,831

1,995
1,995¥11,827

ShareacquisitionrightsTotal net
assets¥282¥91,699

27
27
¥310

(4,537)
6,489(1,438)
41
–
2,023
2,578
¥94,278(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

94

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Financial Report and Corporate Information

Consolidated Statement of Cash Flows(Millions of yen)
Fiscal year ended March 31, 2021

Fiscal year ended March 31, 2022

¥7,797
1,700
1
79
68
–
231
(1,525)(296)(1,594)
(39)
(50)
(540)
113
(7)
19
4,770
246
(10,777)¥9,514
1,587
22
114
6
140
–
3
351
726
–
9
(575)
112
(50)
77
5,389
(573)
(1,218)

Impairment losses
Loss on retirement of non-current assets
Office relocation expenses
Increase (decrease) in provision for loss on business of subsidiaries and associates
Compensation for damage
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for retirement benefits for directors (and other officers)
Increase (decrease) in provision for loss on construction contracts
Interest and dividend income
Interest expenses
Loss (gain) on sale of investment securities
Loss on valuation of investment securities
Decrease (increase) in trade receivables
Decrease (increase) in costs on construction contracts in progress
Increase (decrease) in advances received on construction contracts in progress

1,088

–

Increase (decrease) in contract liabilities–(1,706)
3,159
2,737
540
(114)
(29)
(3,079)
–
(115)
(421)
¥(483)

6,154
2,080(4,324)
19,548
575
(112)
(10)
(1,839)374(6)–¥18,529(17,000)
17,000(1,494)
(93)
(23)
358
15
20
74
(280)
(1,423)(19,000)
17,000(1,010)
(117)
(21)
182
12
20
304
(755)
(3,384)

Increase (decrease) in other current liabilities
Other
SubtotalInterest and dividends received
Interest paid
Commitment fee payment
Income taxes paid
Income taxes refund
Office relocation costs paid
Compensation for damage paid
Cash flows from operating activities

Proceeds from long-term borrowings

245
1,000
(1,370)(1,171)0(203)(5,474)(6,974)0

Repayments of long-term borrowings
Purchase of treasury shares
Proceeds from exercise of shares options
Repayments of lease obligations
Dividends paid
Cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

21(8,859)45,946¥37,087－(1,390)(1,438)0(152)(4,537)(7,518)64
7,692
37,087¥44,779

Financial Report

Increase (decrease) in trade payables

Net increase (decrease) in short-term borrowings

Financial Report and Corporate Information

Depreciation

Year ended March 31, 2022

Cash flows from financing activities:

Cash flows from operating activities:
Profit before income taxes(Millions of yen)
Year ended March 31, 2021

Cash flows from investing activities:
Purchase of securities
Proceeds from redemption of securities
Purchase of property, plant and equipment
Payments for retirement of property, plant and equipment
Purchase of investment securities
Proceeds from sale of investment securities
Proceeds from collection of loans receivable
Subsidies received
Proceeds from maturity of insurance funds
Other
Cash flows from investing activities

96

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Financial Report and Corporate Information

Corporate Information, Business Locations and Group Companies(as of April 1, 2022)

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

Corporate Information

Domestic Business Locations

Representative Offices and Group Companies Overseas● Representative officeGroup company

Company nameSanki Engineering Co., Ltd.
Date of establishment

Hokkaido
branchofficeApril 22, 1925
Share capital
8,105.18 million yen

Hirokazu Ishida, President

Hokuriku branch officePrincipal lines of businessToyota branch office

Facilities construction, plant and machinery
systems, real estate

Chubu branch

Number of employees (as of March 31, 2022)

Chugoku branch office
Kyoto branch
officeConsolidated: 2,607
Non-consolidated: 2,096

Sanki Construction Engineering(Shanghai) Co., Ltd.

Kanto branch office

Facility design, construction, maintenanceand consulting

Ibaraki branch office

Sale of aeration systems
Head office
Tokyo branch

Branches: 3
Branch offices: 15

Yokohama branch office

Training Center：1
Laboratory

Head office
Shikoku branch officeKansai branch
Kobe branch
officeAustria Office

Sanki Techno Center
R&D Center
Yamato Product Center

Mikawa branch
officeFactory: 1

Shizuoka branch office

Consolidated Subsidiaries

AQUACONSULT
Anlagenbau GmbH

THAI SANKI ENGINEERING &CONSTRUCTION CO., LTD.

Manufacture and saleof aeration systems

Facility design, construction,
maintenance and consulting

Non-consolidated Subsidiaries

Affiliate Not Accounted for by the Equity Method

Sanki Techno Support Co., Ltd.

Sanki Chemical Engineering & Construction Co., Ltd.

Sanki Partners Co., Ltd.

Tomakomai Netsu Service Co., Ltd.

PFI Okubo Techno Resource 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 and networks

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 ofwater/wastewater treatment facilities

Established: August 1, 1980
Capital: 10 million yen
Business areas:• Insurance agency, leasing and temporary staffing

Established: July 20, 1971
Capital: 165 million yen
Business areas:• Heat supply to multi-unit housing, and operation and maintenance of cleaning
center facilities

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

Sanki Sangyo Setsubi Co., Ltd.
Established: May 1, 1980
Capital: 20 million yen
Business areas:• Safety management, installation, instrumentation work,
renovation, periodic maintenance, and upkeep of generalequipment (production, transportation, etc.) as necessary• Development and maintenance of computer software fortransportation management

98

AEROSTRIP
Corporation

Chiba branch office

Kyushu branch office

Offices

8-1 Akashi-cho, Chuo-ku, Tokyo

Tohoku branch office

SANKI REPORT 2022

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 and waste
treatment facilities, etc.
• Operation, maintenance and management, and sale ofchemical products for these facilities

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.

AEROSTRIP Corporation
Acquired a controlling interest in September 2006
Capital: 100 U.S. dollars
Business areas:• Sale of aeration systems

Corporate Information, Business Locations and Group Companies

Representative

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 facilitiesof the Sendai Clean Center

Established: May 6, 2008
Capital: 16 million baht
Business areas:• Facility design, construction, maintenance and consulting

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Financial Report and Corporate Information

Share Information

Third-Party Opinion

Fiscal year

April 1 to March 31 of the following year

Annual general meetingof shareholders

Late June each year

Trading unit

100 shares

Number of authorized shares

192,945,000

Number of issued shares

59,661,156■ Ownership Statistics

Treasury stock: 1
3,900 thousand shares(6.54%)

Individuals and other: 14,075
15,077 thousand shares(25.27%)

Yoshinao Kozuma

Professor Emeritus, Sophia University

14,524

1. R einforced Framework for Promoting Sustainability Management

Transfer agent and special
account management institution

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

Stock exchange listing

Tokyo Stock Exchange

Securities code

1961

The Sanki Engineering Group has been reinforcing its frameworkfor promoting sustainability management ahead of “Century
2025” Phase 3, which starts in fiscal 2022. In terms of organization,
the Company established a Sustainability Committee in
November 2021. Chaired by the president and comprising
directors as members, the committee has been launching inquick succession important sustainability initiatives that include
formulating a sustainability policy, setting an ultra-long-term
vision, determining materiality, and publicizing a carbon
neutrality declaration. In terms of governance, the Company
appointed its first female external director. In addition, through its
new initiatives under Phase 3, it has made further contributions
toward realizing a decarbonized society by developing newtechnologies and raising the goals of the SANKI YOU EcoContribution Point system while significantly improving working
conditions through work style reforms such as promoting the
Smile Project, driving DX to raise productivity and reduce work
hours, and broadly revising its personnel system. These are allindicative of a policy of integrating sustainability management
and business strategy, and they convey a powerful message frommanagement concerning Sanki Engineering’s growth strategies
in a sustainable society.

Financial
institutions: 26
22,472
thousand shares(37.67%)

Foreign corporations and other: 206
13,044 thousand shares(21.86%)

Securities companies: 36
974 thousand shares(1.63%)

Other corporations: 180
4,191 thousand shares(7.03%)■ Major Shareholders

Number of Shares Held(Thousand Shares)

Shareholding Ratio(%)

The Master Trust Bank of Japan, Ltd. (Trust account)

6,899

12.37

Meiji Yasuda Life Insurance Company

5,570

9.99

Taiju Life Insurance Company Limited

3,134

5.62

Name of Shareholder

Sanki Kyoueikai

2,965

5.32

Nippon Life Insurance Company

2,324

4.17

Custody Bank of Japan, Ltd. (Trust Account)

1,970

3.53

Sanki Engineering Employee Shareholding Association

1,446

2.59

State Street Bank and Trust Company

919

1.65

MSIP Client Securities

887

1.59

JPMorgan Chase & Co.

729

1.31

Notes:
Although the Company holds 3,900 thousand shares of treasury stock, it is excluded from the list of major shareholders. Calculation of shareholding ratio excludes treasury stock.

3. Other New Initiatives

The formulation of a human rights policy and environmental
policy was a timely initiative, considering how human rights andenvironmental due diligence have become institutionalized inEurope and the strong likelihood that Japan will need to follow
suit sooner or later. In the area of disclosure, the newly publishedmessage from the CFO, in which he explains the Company’s
capital and financial policies, made a favorable impression
and is expected to be useful as supportive information forunderstanding the financial impact of climate risk as requiredby the TCFD. Another commendable move in fiscal 2021 is thevalue chain map, which has now been modified with appropriate
information. This makes it easier to understand the risks andopportunities upstream and downstream of the value chain.

Share Information / Third-Party Opinion

Number of shareholders

Sanki Engineering’s commitment to the Japanese government’s
2050 Carbon Neutral Declaration. The Company also set its fiscal
2025 targets for Scope 1, 2, and 3 emissions as an interim goal.
I am slightly concerned that the scenario analysis consistedof a below 2°C scenario and a 4°C scenario. Given the current
situation, in which the below 1.5°C scenario is rapidly becoming
dominant as the global community advocates net-zero emissions
by 2050, it may be necessary to update and reanalyze thescenario. Also, the Company has not provided a clear enoughtransition plan from its 2025 target to 2050 for Scope 3 emissions,which account for 99.8% of its GHG emissions, leaving room for
improvement in the future.

Financial Report and Corporate Information

Share Information (as of March 31, 2022)

4. Future Considerations
Since human rights risks are highly likely to occur with greater frequency
in the supply chain beyond secondary suppliers, the Company willneed to extend the upstream scope of its current value chain map

2. Response to TCFD Recommendations

beyond subcontractors. It is desirable to at least include secondary

In fiscal 2021, the Company made several important decisions on
TCFD compliance, which is required of companies listed on thePrime Market of the Tokyo Stock Exchange, and began disclosing
relevant information. These also count as commendable efforts
made in fiscal 2021. One important decision was the 2050 Visionof becoming the “Enduring Company of Choice,” an ultra-longterm vision of contributing to the realization of a sustainable
society by addressing social issues through engineering, which
together with its Carbon Neutral Declaration, clearly expresses

subcontractors within the scope of risk management. In this connection,
the establishment of a reporting system addressing supply chain humanrights risks will be essential. This issue requires the Company to respondpromptly by establishing a reporting framework, including the external
use of its corporate ethics hotline and other whistleblowing systems.
In terms of social issues, since fiscal 2015 the Company has persistently
fallen short of meeting the legally mandated employment rate ofpersons with disabilities; this calls for an examination of more effective
remedial measures, including a review of hiring policies.

Response to Third-Party Opinion
We are deeply grateful for the valuable insights you have provided on the SANKI REPORT 2022.
This was the 11th year since we began publishing an integrated report, and we appreciate your evaluation of issues, such as our efforts toreinforce the framework for promoting sustainability management. Going forward, we will take concrete steps toward achieving our tasks andgoals to steadily promote the sustainability management of the Sanki Engineering Group.
We will work to make improvements in the areas you pointed out, including the analysis of TCFD scenarios, review of the upstream scopeof our value chain map, and the employment rate of persons with disabilities.
We are resolved to make the best use of the SANKI REPORT to further advance our business activities and help realize a sustainable society.
Takeshi Terazaki Executive Officer and General Manager, Management Planning Office

100

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