vv

Engineering for the Future

Engineering
for the Future

02

03

CONTENTS
Learn about Sanki Engineering’s growth strategies
Introduction
Management Philosophy and Long-Term Vision
History of Sanki Engineering
Business Overview by Segment
Financial and Non-Financial Highlights

Message from the President
Sanki Engineering’s Value Creation
Our Value Creation Process
Addressing Social Issues throughout
the Value Chain
Sanki Techno Center
R&D Center
Medium-Term Management Plan“Century 2025” Phase 2

p. 06

Learn about Sanki Engineering’s business activities
Business Reportand business foundation
ESG Initiatives

Financial Report and Corporate Information

p. 08
p. 10
p. 12
p. 14
p. 18
p. 20

Facilities Construction
Business

Plants & Machinery
Systems Business

p. 30

p. 34

Environment

Social

p. 40

p. 48

p. 26

p. 86

Corporate Information,
Business Locations andGroup Companies

p. 94

Share Information

p. 96

Third-Party Opinion

p. 22
p. 24

Financial Report

Real Estate Businessp. 38

Governance

p. 97

p. 69

Editorial Policy▶︎ Aiming to Produce a Tool that Boosts Understanding of the GroupWe have positioned the SANKI REPORT, theannual report of Sanki Engineering, as a key,
integrated communication tool for reaching all our
stakeholders. We hope it will boost understandingof the Sanki Engineering Group’s business activities
and future direction and welcome feedback
for enhancing our operations and information
disclosure. Listed at right are new approaches weadopted in compiling the 2019 report.

• We created a section highlighting financial and non-financial results that provides an overview
of the Sanki Engineering Group’s business activities (pages 12 and 13).
• We sought to present the report as a coherent whole by providing an index in the margins of
the “Message from the President” section (pages 14 to 17).
• We explained the Sanki Engineering Group’s initiatives on value creation as a continuous flow,from the value creation process to the Medium-Term Management Plan (pages 18 to 28).
• We rearranged the section on CSR activities by adopting a format in which we report
information under ESG headings, making it easier to grasp for diverse stakeholders, including
ESG rating agencies (pages 40 to 84).

▶︎ Reference Guidelines• “International <IR> Framework” of the International Integrated Reporting Council• Ministry of Economy, Trade and Industry’s “Guidance for Integrated Corporate Disclosure andCompany-Investor Dialogues for Collaborative Value Creation”• Ministry of the Environment’s “Environmental Reporting Guidelines 2018”▶︎ Organizations Covered by the Report• Financial information shows consolidated Group figures.
• Non-financial information is based on non-consolidated figures for Sanki Engineering
Co., Ltd. When the information concerns the Group, organizations covered by the data
are specified in the text, list or graph.

• GRI Sustainability Reporting Standards 2016
• ISO 26000▶ Reporting Period
April 2018–March 2019 (Some information from outside this period has also
been included.)▶ Publication Date
September 2019 (previous issue: September 2018; scheduled release of next
issue: September 2020)

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

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SANKI REPORT 201905

Sanki Engineering Group Philosophy

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

Government
andAdministrative
Authorities

Value Creation
throughBusiness Activities

Employees

Shareholders
and Investors

Customers

Partners
Business
Partners

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

Sanki Engineering GroupManagement Philosophy
Sanki Standard

Sanki Engineering Group Management Philosophy
Sanki Standard

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

Increased reliability willencourage more stakeholders tochoose our company.

Phase 3

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

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

Phase 2

(FY2019–2021)

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

Medium-Term Management Plan

3-year period toenhance reliability

Phase 1

(FY2016–2018)

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

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

Please refer to pages 26 through 28 for more information.

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

FY2019FY2022

FY2025Sanki Engineering’s 100th Anniversary

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100

Introduction

2025 Toward the 100th Anniversary

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

2000s

1980s
◦Starts manufacturing conveyors.
◦Concludes sales contracts for machinery used in mining-related chemistrywith U.S.-based Dorr Inc. and Oliver, Inc.

Laying the Base for TechnologicalCompetence by Meeting the Needsof the Era◦Advances network systems, including LAN,building monitoring and automated control.
◦Provides air conditioning, plumbing and an open
BA system (automated control, BEMS) for the Roppongi Hills
building and other construction work.

◦Launches the information andcommunications business.

Sanki’s Advanced Technology
Bolsters a Construction Boom

1920s

Meeting the Needs of a Rapidly
Advancing Information Society

Rising to the Challenge of
New Businesses

1940s◦Launches the facility systems business todeal with office integration and moving.

◦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.

◦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.
1995
Great Hanshin
Earthquake

1950s◦Provides heating, plumbing, steel frame construction,and building materials for two major construction
projects: the Shiga manufacturing plant of Toyo Rayon(currently Toray Industries, Inc.) and the refrigerated
warehouse of Aomori Seihyo.

1986
Japan’s Equal Employment
Opportunity Law

A Proactive Approachto TechnologicalInnovation◦Installs Japan’s first centralized air conditioning system
for an entire structure at Mitsui’s main building.

◦Completes work on
Japan’s first all-fluorescentlighting system in the Taisho Marine and Fire Insurance Building.
◦Becomes involved in night-soil treatment plant disposal facilities
in response to urban hygiene needs.
◦Delivers a roller conveyor to the Japanese
1964
Antarctic Research Expedition II.
Tokyo Olympics

1930s

Diversified and Expanded
Businesses Lead to Greater
Technological Competence

1958
Opening of Tokyo Tower◦Develops and installs a proprietary incinerator
for facilities in the Sanshin Building.
◦Establishes Toyo Carrier Industries together
with U.S.-based Carrier Engineering andlaunches the air conditioning business.
◦Completes work on the Tokyo Office of Nippon
Life Insurance Company (currently Takashimaya
Nihonbashi department store).

1960s

1970
Japan World
Exposition, Osaka
1972
Reversion of Okinawa

A Manufacturer that
Responds to the Needs of
the Times

1945 End of World War II

th

1970s

Wide Range ofTechnological Innovations◦Completes work on Japan’s first large-scaleclean room at NEC’s Sagamihara plant.
◦Develops the world’s first completely
unmanned automatic sorting system andairport baggage handling system.

2008
Lehman Brothers
bankruptcy

1997
Adoption of the Kyoto Protocol

2019
Start of the Reiwa era
in Japan

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

2010s

1991
Collapse of Japan’s
bubble economy

Contributing to a Sustainable
Society by Bolstering the LCE
Business

1990s◦Promotes the LCE Business, in which
the Sanki Engineering Group provides
life cycle engineering for buildings andfacilities, from planning, design andconstruction work to maintenance,
operation/management, renovation andreconstruction.

Driving Progress inEnvironmental andInformation Technologies◦Wins order for
the DBO project,a bulk contract
encompassing
design, construction,
management andmaintenance.

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

◦Completes hygiene
facility for the Tokyo
Midtown Hibiya
building.

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

◦Completes work on air conditioning,plumbing and electrical systems
for Japan’s first skyscraper, theKasumigaseki Building.
◦Develops the standardized “6S sash”
and gains the top market share among
steel sash manufacturers.

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

April 22, 1925

1931

1950

1963

1971

1982

2000

2011

2018

Sanki Engineering isestablished as a spinoff from
the Machinery Departmentof the former Mitsui Bussan,with capital of 500,000 yen
and 12 employees.

Moves the head office to Hibiya

The outbreak of the Korean War
leads to a war-driven economy,
and the Japanese economy takes
a favorable turn. Expansion ofdemand for building constructionand equipment results in dramatic
improvement in the Company’sbusiness performance.

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

Sets up theEnvironmental
Administration office.

Builds the TechnicalResearch Laboratory.

Opens the Shonan
Training Center.

Moves the head
office to Tsukiji.

2005

2015

Begins operations at all
facilities of the Sanki
Techno Center.

Moves the head office to
Nihonbashi.

90th Anniversary.

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

1958
Capital exceeds 1 billion yen.

08

SANKI REPORT 20191973
Spins off the sash
business.

2019

2016
Launches the longterm vision “Century
2025.”

Begins operations at
the Yamato ProductCenter.

SANKI REPORT 201909

Introduction

Business Overview by Segment(year ended March 2019)

Facilities Construction BusinessNet sales

179.3

Net Sales
Composition Ratio

billion yen

84

Plants & Machinery Systems BusinessNet sales

32.2%

Main Sales Items● HVAC Systems

Our Facilities Construction Business isconducted in ways that are friendly toboth people and the environment andthrough systems that are convenient,
comfortable and efficient and also
save energy. We are engaged in wideranging fields, including designing
HVAC and plumbing systems forbuildings, an industrial HVAC system,and electrical systems and developing
smart building solutions and facility
systems.

• HVAC systems• Industrial HVAC systems• Clean rooms• Environmental control systems• Pharmaceutical and food
manufacturing facilities• Freezing and refrigeration• District heating and cooling plants• Nuclear power-related facilities● Electrical Systems• Electrical systems• Telecommunication systems• Communication-related facilities• Electrical civil engineering● Plumbing and Drainage Systems• Plumbing system for water supply and drainage• Food service equipment• Disaster prevention systems%

Machinery Systems Business
Facilities Construction
Business

Main Sales Items
Facility Systems
Business● Facility Systems• Design for fit-out and relocation of offices andworkplaces• Consulting for project management● Smart Building Solutions• Central monitoring and automated control systems• ICT systems• Crisis management (BCP) solutions• IP phone systems• Security systems

16

Net Sales
Composition Ratio

billion yen

5%● Conveyance Systems• Lightweight conveyors• Distribution-related conveyors• Sorting devices• Automated warehouse

Electrical
Systems Business● Material Handling Systems• FA systems• Clean conveyance systems• Material handling systems• Airport baggage and cargo handling systems• Medical handling systems• Handling information control systems

11 %Industrial HVAC
Business

We provide material handling systems
and conveyance systems that meetcustomer needs and challenges insupply chain management.

34 %Machinery
Systems BusinessNet sales

212.3

billion yen*

6%

Net Sales
Composition Ratio

6%

Environmental
Systems Business

10 %

1

Real Estate BusinessNet sales

1.9

Net Sales
Composition Ratio

billion yen

Main Sales Items● Real Estate Leasing● Building Maintenance and Management• Land leasing• Building leasing• Facility maintenance and upgrades%

Environmental Systems Business

Building HVAC
and Plumbing
Business

Main Sales Items

34 %Real EstateBusiness

1%

Plants & Machinery Systems
Business
Our Real Estate Business includes
operations in the areas of real estateleasing and building management.
We are striving to expand into higher
value-added real estate while taking
advantage of our current technology.

● Waste Treatment• Waste incineration facilities• Landfill wastewater treatment
facilities• Sludge incineration facilities● Water Treatment• Water and sewage treatment facilities• General and industrial waste disposal andrecycling facilities• Sludge recycling facilities• Industrial wastewater and waste gas
treatment facilities• Plant facilities for the food and chemicalindustries

We develop unique facilities andsystems for water and sewage
treatment and waste treatment toenhance living environments whileconserving energy and reducing CO2
emissions.

10

Net Sales
Composition Ratio%*Includes items not listed in the graph such as 0.7 billion yen in other net sales and 1.8 billion yen in elimination of inter-segment transactions.

10

SANKI REPORT 2019

SANKI REPORT 201911

Introduction

Financial and Non-Financial Highlights

Financial Data (Consolidated)

Non-Financial Data

Orders Received and Net Sales

Gross Profit Margin■ Orders received (Billions of yen)

■ Net sales (Billions of yen)

217.0

212.3

173.3
179.5

13.6%
billion
yen
183.2
178.9

185.8
168.5

● Gross profit margin (%)

billion
yen

%

191.1
170.1

217.0 212.3
12.8

13.4

14.7

14.9

2015

2016

2017

（FY）

2018

2014

2015

2016

Consolidated

13
322

2017

2018 （FY）

To t a l

57.1

87
2,072

Female10.0

2014

Ratio of Annual Paid Leave Taken

Consolidated

2,394

0.2
point

14.9

24.8%

Number of Employees

Male

%

Male

%

%

54.0
76.1

%

Female%As of March 31, 2019

FY2018Rate of Reinstatement after Childcare Leave
Equity Ratio

Ordinary Income and Profit Attributable to Owners of Parent■ Ordinary income (Billions of yen)

11.2

45.8

9.0

50.7%
131.6%
billionbillion
3.経常利益／親会社株主に帰属する当期純利益
yen
yen

8.1
5.3

3.8
2.4
2014

2015

6.8
4.6

7.4

2016

2017

93.8

● Equity ratio (%)■ Profit attributable to owners of parent (Billions of yen)

11.2
9.0

2.8
point

%

（FY）

48.1

49.8

2014

2015

51.5

48.6

45.8

2016

2017

2018 （FY）

Annual Dividend per Share and Payout Ratio● ROA (%)

6.0

● ROE (%)

1.7
point

%

10.3

■ Annual dividend per share (Yen)

5.8
point

%

3.0

4.7

2.2
2014

12

2015

SANKI REPORT 2019

5.5

4.5

4.1

4.3

2016

2017

52.2

35.8

40.6

%

20
（FY）

2014

2015

30

2016

FY20180.10 0.00

40.0
60

30

%

Industrial Accidents
Frequency Rate*1 andSeverity Rate*2

15.5
point

Frequency rate

55.5

6.0

2018

14.0

companies
As of March 31, 2019

Contribution to CO2 Reductions
at Customers through Sanki
Products and Technologies

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

Orders received (consolidated)

Non-consolidated

20,699

22.1%

t-CO2
FY2018

97.8

0.2%

%
FY2018● Payout ratio (%)

40.0

yen

120

10.3
6.3

60

25 yen%Year-on-Year Comparison of
Problems during Construction–
ROA/ROE

860

6.2 %

FY2018

3.9

2018

Members of Subcontractor Groups

Consolidated

35

2017

2018

（FY）

Severity rate

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

2018

Test and R&D Expenditures

ICT Investment

1.45

1.06

12.9%

billion yen
FY2018billion yen

FY2018*1 Frequency rate: Accidents in the construction site per one million working hours; this figure indicates the frequency with which accidents occur.
*2 Severity rate: Calculated as the number of lost workdays caused by accidents in the construction site per one thousand working hours; this figure indicates theseverity of the accidents.
SANKI REPORT 201913

Message from the President

Business Environment and Results for Fiscal 2018

All-Round Growth in Profit due to a Favorable Business Environment
In fiscal 2018, the Japanese construction market was essentially supported by asteady flow of investment in construction projects due to a gradual economic recovery
and improved corporate earnings. We received substantial orders under a favorable
environment in which the private sector increased its capital spending to raise productivity
while public investment remained constant. In addition to demand from redevelopment
projects in the metropolitan area ahead of the Tokyo 2020 Olympic and Paralympic Games,
Japan’s entire infrastructure has entered a period of upgrades, 75 years after the end ofWorld War II. For these reasons, we expect solid demand in the coming years.
Under these business conditions, the Sanki Engineering Group was able to demonstrate
outstanding performance in wrapping up its Medium-Term Management Plan “Century
2025” Phase 1, which covered the period from fiscal 2016 to fiscal 2018. We enjoyedincreases in orders received and net sales across all business areas while also seeing
growth in profit-related categories, including operating income, ordinary income, and profit
attributable to owners of parent. This allowed us to report high levels of earnings unseen
since Japan’s bubble economy period.
Major factors behind our strong performance include the successful culmination of ourongoing initiatives to enhance quality and the substantial increase in orders received andnet sales for industrial HVAC systems used in factories, which were mostly large-scale
projects, in our Facilities Construction Business. I believe that we are enjoying the fruits ofyears of steadfast efforts to forge relationships of trust with our customers.

Reference
Medium-Term Management
Plan “Century 2025” Phase 1(FY2016−2018)
P. 26
The first three-year period ofCentury 2025, a long-term vision
covering the ten-year period
from fiscal 2016 to fiscal 2025,
which in turn is divided into three
periods.

Business Performance (Billions of Yen)

Tsutomu
Hasegawa
President

We will further reinforce our reliability
towards our 100th anniversary to become
the company of choice for even more
stakeholders.

14

SANKI REPORT 2019

179.5

183.2

185.8

191.1

173.3

178.9

168.5

170.1

8.1
5.3
3.8

4.6

11.2

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

9.0

7.4

6.8

217.0
212.3

3.9

2.4

2014

2015

2016

2017

2018

（FY）

Review of Medium-Term Management Plan “Century 2025” Phase 1

Measures to Enhance Quality Bear Fruit in the Final Year
We have completed our Medium-Term Management Plan Phase 1, the first three-year
period of the “Century 2025” long-term vision for becoming the company of choiceby 2025, the 100th anniversary of our founding. Over the past three years, we sought
to enhance the quality of our technology and human resources toward establishing afoundation responsive to change by implementing three key initiatives: (1) Strengthen corebusinesses, (2) Promote growth strategies, and (3) Enhance the Sanki Brand.
One of our accomplishments in strengthening core businesses was enhancing

ReferenceLong-Term Vision“Century 2025”
P. 06–07

SANKI REPORT 201915

Message from the President*1 A subcommittee dedicatedto reforming work styles.
*2 Design Build Operate: A
process through which thedesign, building, operation,and maintenance of a projectis awarded to a private
enterprise as a bulk order.
*3 Stock project: Project that
leads to net sales and profits
over the long term.
*4 A business concept of the
Sanki Engineering Group.
Throughout the life cycle of abuilding, we provide services
from new construction,
repair, and maintenance torenewal and reconstruction.
*5 The Sanki Techno Park Projectis intended to redevelop theland and buildings owned
by Sanki Engineering at the
Sanki Yamato Site in Yamato
City, Kanagawa Prefecture.
*6 Smile Project: Established in2015 under the president’s
leadership to promote work
style reform unique to Sanki.

Reference
Sanki Techno Center
P. 22–23

Referenceorganizations and mechanisms that support workplaces in the
Facilities Construction Business. We broadened the scopeof support through such measures as shifting to an online
procurement system, establishing technical and design support centers, and launching
the Smile Site Plan*1 for pursuing work style reform, and these efforts resulted in
substantial contributions to increasing productivity and profits.
In the Machinery Systems Business, we advanced our response to labor saving
and automation needs by expanding sales of hybrid facilities that combine robots withconveyors and material handling systems for logistics facilities. In the Environmental
Systems Business, we received an order for a large-scale DBO*2 project involving waste
incineration facilities, thereby securing a stock project*3 for the future that helps promote
our LCE (life cycle engineering)*4 business.
As for promoting our growth strategies, our foremost accomplishment was the
grand opening of the Sanki Techno Center, a comprehensive research and development
facility that serves as the centerpiece of the Sanki Yamato Site Redevelopment Project(STeP Project*5). I also think that we made considerable progress in enhancing the Sanki
Brand by developing human resources with the Sanki spirit through initiatives such as
the Smile Project*6, our unique effort for reducing long working hours, and the Century
Communication Up (CCU) events that provide an opportunity for direct dialogue between
management and employees.
I am very pleased that we were able to attain our financial performance targets
for all indicators—net sales, gross profit, operating income, and ordinary income—in
the final year of Phase 1. I think that we should redouble our efforts for reducing long
working hours and avoiding overwork amid the growing work load. Once we havedone so, we will focus our energy on exploring technologies and businesses that will
generate future growth.

CenturyCommunication Up
（CCU）
P. 65

New Medium-Term Management Plan “Century 2025” Phase 2

Enhancing Reliability by Proactively Transmitting Information in Addition to
Pursuing Phase 1 Initiatives
Reference
New Medium-Term
Management Plan“Century 2025” Phase 2(FY2019−2021)
P. 26–28

Reference
R&D Center
P. 24–25

16

SANKI REPORT 2019

In May 2019, we announced our new Medium-Term Management Plan “Century 2025”
Phase 2 (FY2019−2021), which signaled the end of Phase 1, the previous three-year
period for enhancing our quality, and the start of a new phase in which we will seek toenhance our reliability in serving stakeholders. Our key initiatives for Phase 2, however,are the same as those for Phase 1: strengthen core businesses, promote growthstrategies, and enhance the Sanki Brand. This reflects our basic stance of emphasizing
a consistent continuation of Phase 1 initiatives over pursuing eye-catching initiatives inPhase 2.
The improvement in profit margins was a major accomplishment in strengthening
our core businesses during Phase 1, representing a direct result of removing thenegative factors. In other words, it was due to the active use of ICT and AI, measures forsupporting construction sites and various other measures on work style reform, which
helped raise construction quality. We will continue these initiatives in Phase 2.
In the area of promoting growth strategies, we completed construction of the Sanki
Techno Center and R&D Center, which had been the largest investment of Phase 1, andthe new Yamato Product Center plant completed in August 2019. In Phase 2, the main
focus will be to make practical use of these centers as tools. As they commence fullscale operation, they must fulfill their roles as the strategic foundation for developing

our core businesses. During Phase 2, we will also seek to steadily develop overseas
businesses, and we have our sights on forming alliances with local companies and M&A
as we develop the foundation for our local operations.
From the perspective of enhancing the Sanki Brand, we will work toward the clear
goal of enhancing reliability for our stakeholders. To that end, we will raise the qualityof our human resources and technology while also seeking to reinforce our informationtransmission. As the first step, we disclosed our basic approach to financial and capital
policies, including concrete targets for ROE and total return ratio. In Phase 1, we sought
to enhance quality, which we can hone through our own efforts. Being recognized
for reliability, however, requires a process of evaluation based on pre-disclosed plans.
While bad results will also invite close scrutiny, I believe that reliability is built upon suchdialogue.
As in Phase 1, our ESG Policies have also been incorporated into Phase 2 as ourmanagement strategy. We will be guided by these policies as we seek to provide
benefits for society such as decarbonization, energy savings, and energy creation
through our core businesses and promote work style reforms while building an evenmore robust system of governance. In this way, we will further enhance our corporate
value and sustainability.

Reference
Reinforce Information
Transmission
P. 84

Reference
ESG Policies
P. 28

Sanki Engineering’s Value Creation

Realizing Comfortable Environments as Value Creation that Helps
Achieve the SDGs
Most of Sanki Engineering’s business activities fall under the “B to B” category.
However, business never ends with the “B to B” phase and ultimately leads to “B
to B to C” in any sector of industry. Through our businesses we are involved in theinfrastructure of every conceivable sector. In other words, we are capable of supporting
the growth of any company that comes into direct contact with consumers.
Sanki Engineering has been guided by its Management Philosophy: “We create
comfortable environments through engineering and widely contribute to social
development.” This expresses our constant awareness of seeking social development
through our business activities, which also leads to helping achieve the Sustainable
Development Goals (SDGs). These days, society’s needs are increasingly focused on
maintaining comfort with less energy, which is exactly what we do. Automation, laborsaving, and the maintenance and upgrade of infrastructure are also areas in which
we should contribute to solutions as a tough issue facing a society with a declining
population. To continue playing an essential role far into the future, I believe that wemust continue creating value which is unique to Sanki Engineering.
We will continue to hone the quality of our human resources and technology so we
can offer a versatile response to social change and strive to achieve reliability by buildingon the satisfaction and safety of our stakeholders to attain the goal of our “Century
2025” long-term vision of becoming the company of choice.

Reference
Process of Value
CreationP. 18–19

SANKI REPORT 201917

Sanki Engineering’s Value Creation

Our Value Creation Process
Guided by the “Sanki Standard” management philosophy, the Sanki Engineering Group strives to fulfill its mission ofrealizing all types of comfortable environments and contributing to the development of a sustainable society by creating
value at each step of the business process and in every business area.

Social Needs

Business Activities

Key Initiatives (Phase 2)

Value Created

ss that Leverages To
Busine
tal E
f
o
e
ngin
ang
R
eer
d
ing
oa
r
B

CO2 reduction
based on our
proposals

20,699 t-CO2
183 cases

Facilities Construction
Business

FY2018

Driving Force for Value
Creation

Stakeholder Expectations

Flexible, sophisticated response
to customers

Largescaleconstruction
work*2

Strengthen Core Businesses

Competent engineers andresearchers

16 projects

Sanki Techno
CenterWide-ranging technologicalexpertise➡ Pages 22 and 23

Human Resources
×Technology

Subcontractor groups with 860
member companies
Sound financial base

FY2018Promote Growth Strategies
Contribution
to SDGs

Enhance the Sanki Brand

Plants & Machinery
Systems Business

Planning and
Basic Design

Renovation andRenewalMachinery Systems Business
Environmental Systems
Business

Maintenanceand Inspection

DesignDisclose Financial and Capital Policies
and ESG Policies
Reinforce Information Transmission

Number ofregistered patents

Creation of comfortableenvironments

Continuous
enhancement ofcorporate value
A better, sustainable society

More than 400
As of March 31,
2018➡ Page 82
Procurement
Construction

Me
etin
g the
Social issues

Operation andManagement

Needs through LCE*1 in the

n
ai
h
C
ue
l
a
re V
Enti

Accident *3
frequency rate

0.10
2018

➡ Pages 20 and 21

Climate change
Declining population
Infrastructure maintenanceand upgrades

Phase2Phase1Work style reform

Long-Term Vision

Management Philosophy

Century 2025
Sanki Standard➡ Pages 26 to 28

Phase3➡ Pages 6 and 7*1 A business concept of the Sanki Engineering Group. Throughout the life cycle of a building, we
provide services from new construction, repair, and maintenance to renewal and reconstruction.

➡ Page 6*2 Construction projects of over 1 billion yen each.
*3 Scope of data: Sanki Engineering construction sites (Sanki Engineering Co., Ltd. and business
partners)

18

SANKI REPORT 2019

SANKI REPORT 201919

Sanki Engineering’s Value Creation

Addressing Social Issues throughout
the Value Chain
The Sanki Engineering Group addresses various social issues along its value chain by promoting LCE (life cycle engineering),
in which we are responsible for the entire process from the planning of a facility, design, and construction to aftercare,maintenance, and management.

Social Issues● Labor shortage● Work style reform● Aging facilities and social infrastructure● Disaster prevention, mitigation, and resilience● Supply chain risks● Fair procurement● Shift to a decarbonized society● Limited resources

Planning and
Basic Design

DesignProcurement● One-stop solution● Optimal proposals that accurately serve customers by meeting
sophisticated and diversified needs● Proposal and design for reducing costs● Technological proposal and design for disaster prevention and mitigation● Higher efficiency oftransactions throughonline procurement● Collaboration withbusiness partners● Proposal and design for reducing environmental impact, such as energy
saving and energy creation, and resource saving● Procurement ofenergy-saving, highly
efficient equipment

Relevance to SDGs●●

Minimizing
Negative
ImpactUtilizationof BIM*● Safety first● Quality assurance● Labor shortage● Human rights risks● Waste issue

Op en Inno v a t ion L e d b y the Sank i Te chno C en t e r

AddingSanki’sStrength
to Create
Value● Related to society ● Related to the environment

Enhance and raise efficiency of design quality● Appropriate management of customer information, protection of
personal information● Centralized management using common Company-wide sales tools

Relevance to SDGs

Raise efficiency and the level of● Fair and transparent
transaction on an equal
footing●● CSR procurement
Relevance
to SDGs

Construction

Advanced
Technology● Quality
management
activities toenhance quality● Labor savings inconstruction work

Relevance to SDGs

● Labor shortage● Improving productivity● Safety first● Ensuring information security● Disaster prevention, mitigation and resilience● Aging facilities andequipment● Renovation costs● Waste generated during
disassembly● CO2 emissions

Operation/
Management

Diverse Human
Resources

Maintenance/
Inspection

Collaboration among
Group Companies

Renovation andRenewalCollaboration with
Subcontractors● Automation, labor-saving, improved productivity● Enhancement of comfort and convenience● Use of IoT for managing smart buildings● Response to high-level information security requirements● Life-extension and long-life facilities● Reduced running costs● Efficient preventive maintenance based on fault prediction● Disaster prevention and mitigation measures

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

Relevance to SDGs

Raise efficiency and level of operational tasks

procurement and construction● Prevention of problems and complaints● Health and safety activities, onsite hazard prediction● Collaboration with subcontractors● Response to human rights issues
Relevance to SDGs

● Energy-saving initiatives● Proper disposal and reduction of waste● Compliance with environmental regulations
Relevance to SDGs

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

20

SANKI REPORT 2019

SANKI REPORT 201921

Sanki Engineering’s Value Creation

Technology training and safety
education facilities

R&D Center

P. 24

Sanki Techno Center

Accommodations

Showroom

Facilities tocontribute to the
local community

Comprehensive Training and Research Facility
for Refining and Enhancing the Quality of Our
Technology and Human Resources

Techno Plaza Showroom

Introducing Our Social Responsibility and Potential Basedon the SDG Concept
The Techno Plaza introduces the Sanki Engineering Group’s total engineering basedon the concept of SDGs, which are common global goals. We do this using fourbooth exhibits under the themes of “Comfort,” “Industry,” “Energy Saving,” and“The Environment” and convey how we fulfill our social responsibilities throughunique technologies as well as our future potential from various perspectives.

In October 2018, the Sanki Techno Center opened at the Sanki Yamato Site in Yamato City, Kanagawa Prefecture, as a research,training, and study facility for developing and imparting the advanced technical skills of the Sanki Engineering Group. It plays a keyrole as the cornerstone of our growth strategy under the Medium-Term Management Plan “Century 2025” Phase 1 (FY2016–2018) and is essential for enhancing the quality of our human resources and technology under Phase 2 (FY2019−2021).

Techno Plaza Showroom

Accommodation Facilities and Amenities

Providing Facilities that Encourage Thorough and Comfortable
Training and ResearchTraining Area

Acquiring Empirical Knowledge Only Obtainable Onsite
The Sanki Techno Center is a strategic base for refining
our technology and human resources, where practicaltraining is offered in the Technology and Skills Training
area and the Safety Experience area in addition topersonnel training, courses for obtaining qualifications,and other classroom lectures.
In the Technology and Skills Training area, trainees
gain practical technological and other skills typically only
acquired onsite, by using mock-ups of actual construction
sites and real equipment (photo at lower left). We also
have a program for finding mistakes in the mock-up andcomparing them to correct construction procedures as amore efficient way of acquiring knowledge.
In the Safety Experience area, participants gain

empirical knowledge by getting a physical sense ofsafety through experiencing everyday construction
site risks, including the use of dummies for checking
unsafe actions, being suspended from a height wearing
a safety harness (photo at lower right), and using virtual
reality to simulate working on scaffolding.
New employees who started working in April 2019
have received joint training, the durations of which varied
from one to six months depending on the department
they had been assigned to. We intend to make full useof the center to further improve the quality of humanresources and technologies of the entire Group by
providing more opportunities for employees of our
subcontractors to take advantage of these facilities.

The center has a variety of areas for communication, including a café andlarge tatami floor room, to encourage lively interaction between training
participants and researchers. In addition to offering ample accommodations
with 141 guestrooms, the center houses a gym and other facilities to ensure
comfort during long stays.
Guest room

Regional Contribution

Responding to Local Needs in the Event of a DisasterAs a facility that reaches out to the local community, the center is prepared toprovide temporary shelter for those unable to return home in the wake of adisaster, under an agreement that Sanki Engineering concluded with Yamato Cityin 2013. The center also serves the local community in ways such as maintaining
public access to its biotope, where people can relax and enjoy seasonal plants, thelawns, and aquatic flora, and children can find a safe playground.

Voice

Building a Foundation for Our Growth Strategy

The center has been favorably received. Due in partto unexpectedly high demand from subcontractors
and customers, two-thirds of the guestrooms havebeen continuously in use since the grand opening
in April. Moreover, we have received over 4,000
visitors from the general public in the 100 daysor so since the end of 2018. On the other hand, I
believe that it is essential to nurture and increase
local instructors who are fully acquainted with ourconstruction sites, and we must also improve thetraining programs and expand the facilities.
Technological skills training using real equipment

22

SANKI REPORT 2019

Large room for sheltering people unable toreturn home in the wake of a disaster

When we celebrate our 100th anniversary
in 2025, employees who joined in 2019 will be
participating in the sixth-year training, which follows
the third-year training. Our goal is to ensure thatthe first generation of employees trained at the
Sanki Techno Center will be leading the Company
on their own initiative by that time. We will begin
by operating the facility for a full year to ascertain
the issues that need to be addressed and thenestablish a solid foundation for the Group’s future
growth strategy.

Kazuo Izumi
Executive Officer
General Manager, Sanki Techno Center

Being suspended wearing a full body harness during simulation training

SANKI REPORT 201923

Sanki Engineering’s Value Creation

R&D Center

R&D Base that Combines Our Accumulated
Knowledge and Advanced Technology to Meet
Emerging Needs
We set up the R&D Center within the Sanki Techno Center to give form to our new vision of R&D
at Sanki Engineering. As a total engineering company, we possess diverse component technologies
related to air, water, heat, electricity, machinery, and information, which sustain the infrastructure ofcities, buildings, and production. The R&D Center will seek to raise thelevel of these component technologies while providing solutions withhigh added value and promoting R&D corresponding to the developmentof the diverse businesses that help create a sustainable society.
R&D

Social Issues
and Needs

Promising Advanced
Technologies

Areas of Research・Comfortable air conditioning
technology
・Specialized environmental technology
・Information communications andcontrol technologies
・Logistics and conveyance technologies
・Water treatment and incineration
technologies
・Energy-saving technology

Analysis and
Evaluation

More than 400 registeredpatents (as of March 31, 2019)

Experimentation
and TestingIntellectual
PropertyClo

Big data• Resource conservation

Sanki Techno
Center

• Acceleration• Shorter construction

Cloud

Research
Training
Studies

R&D
Center◦DOUP™ energy-saving HVAC
system for clean rooms

Promoting Open Innovation◦selFort™ smart air conditioning
system for offices

period◦Heat shock monitoring system• Space saving• Comfort◦Robotic food packing

AI and IoT• Safety

Major R&D results in FY2018

te• Product life extension

ra
le
ce
ac ch
ar

• Energy conservation• Cost reduction

Synergy andInnovationudp
the latf
pa ormcesof thare tse• Reliability

Customers• Labor saving
Facilities Construction R&D Division
Facility Systems R&D Division

×

Machinery
Systems R&D
Division×Open Lab

Environmental
Systems R&D
Division

Universities andeducational institutions◦Energy-saving products and asystem for sewage plants

Public research institutions
Broad range of business sectors
In-house business departments

Characteristics of the R&D Center01

Promoting R&D for a Promising
Future in Collaboration with
Business Divisions

The R&D Center collaborates with eachbusiness division to pursue R&D for
new technologies, refine and upgrade
proprietary technologies, conduct
basic research, and investigate newtechnologies. The center is particularly
focused on applying information
communication technology, AI, IoT, andbig data analysis to develop technologies
with high added value. It also supervises
intellectual properties to reinforce theirprotection and utilization by assigning aliaison to each business division.

24

SANKI REPORT 201902

Bolstering Innovation
through the Open Lab

At the R&D Center, companies from a broad
range of sectors, including our customers,
universities, and research institutes aswell as Sanki Engineering’s businessdivisions, get together with an open mind
and generate innovation through a flexible
collaboration that integrates their knowledge
and technologies. We offer ample facilities
to facilitate open innovation, including large,
multi-purpose testing rooms, free space forlively interaction, and discussions between
those both in and outside the Company,
along with mock-up areas where full-size
prototypes can be created.

03

Platform for Vastly
Accelerating the Pace ofDevelopment

In addition to the latest equipment for
testing and analysis, the center provides
the infrastructure and system environment
required to raise the level of development.
Furthermore, we have establisheda cloud platform that can be quickly set
up whenever a new server or storage isrequired during development and verification
processes. This vastly accelerates the paceof development by offering flexible server
specifications and system configurations andallowing users to incorporate the latest AI andIoT technologies.

Voice

Rapid, High-Quality R&D Made Possible by an Open Lab Approach

We are seeking to enhance our humanresources and technology to deliver reliable
solutions for the diverse needs of customers.
As the key strategic base spearheading SankiEngineering’s research and development, theR&D Center emphasizes an “Open Laboratory”
concept. Rapid, high-quality technologicaldevelopment is made possible by taking on
individual themes through a joint effort withmany other organizations.
The R&D Center is now simultaneously
pursuing more than 20 joint research projects
in collaboration with universities, research
institutions, companies from other industries, andseveral Sanki Engineering divisions. These include
AI-based control systems, new material handlingsystems targeting logistics operations, andenergy-saving water treatment systems. Our goal
is to nurture as many new seeds for the future as
possible.
The center is also independently working
on basic research such as the exploration andverification of technological themes for future
development. Our mission is to nurture the SankiEngineering Group’s seeds of technology that canhelp realize the goals represented by the United
Nations’ SDGs and the Japanese government’s
Society 5.0. We intend to forge ahead in our R&D
efforts to create new value and serve society
by demonstrating our unique total engineering
capabilities and actively integrating AI, IoT, andother increasingly important cutting-edge ICT.

Kazuaki Iijima
Executive Officer, General Manager
of R&D Center

SANKI REPORT 201925

Sanki Engineering’s Value Creation

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

Long-term Vision“Century 2025”
Becoming the company of choice

Under the Medium-Term Management Plan “Century 2025” Phase 2 (FY2019–2021), we will launch new initiatives forenhancing reliability while also maintaining the initiatives for Phase 1 (FY2016–2018), a three-year period for enhancing thequality of our technology and human resources.
We will seek to deepen understanding of the Group by disclosing our financial and capital policies and ESG policies
and by reinforcing our transmission of information to enhance the reliability of the Sanki Engineering Group for diverse
stakeholders toward our goal of becoming the company of choice in the next phase.

for our stakeholders

Phase3 (FY2022−2025)

Company of Choice

Phase 2
(FY2019−2021)

Enhance Reliability

Key Initiative

Strengthen Core
Businesses
Improve component
technologies andachieve stable
growthPhase 1
(FY2016−2018)

Enhance Quality
Social Environment
and Issues

Refining technical skills
and human resources toenhance quality

Key Initiative

Key Initiative
Promote Growth
Strategies

Key Initiative

Pursue future growthin the areas oftechnology andbusiness

Develop humanresources thatpossess the
Sanki spirit• Disclose Financial andCapital Policies, and
ESG Policies P. 28

Enhance reliability andbecome the company ofchoice for stakeholders• Reinforce Information
Transmission

Enhance the
Sanki Brand

Phase2▶ Climate change
Introduce energy-saving andenergy creation systems to

Major Initiatives

Improve construc tion
produc tivit yMeet energy saving and labor
reduc tion needs

Promote technological R&D

Continue to receive orders
for stock projec ts

Create bet ter work conditions

Improve internal
communicationachieve global decarbonization

Phase1▶ Declining population
Address energy saving andautomation needs, secureengineers and technical staff,
and improve productivity▶ Work style reform
Address diverse work styleneeds, balance work withparenting and nursing, andreduce total work hours▶ Infrastructure
maintenance andupgradesImplement maintenance of
aging infrastructure

26

SANKI REPORT 2019

Passing on technical skills
Anticipating the age of
maintaining building stock
Developing next-generation
technologies▶Established the Sanki Techno Center for imparting technicalskills to the next generation and further advancing
technological development▶Forged ahead in LCE toward establishing a solid business

Improve productivity through the operationof the Yamato Product Center

Utilize the Sanki Techno Center and R&D Center

foundation by receiving orders for a new large-scale construction
project and DBO projects for a waste disposal facility

Phase2▶Kept pace with progress in robotics, AI, and IoT▶Reconstructed the R&D Center to create an environment fordeveloping new technologies

Phase1
Net sales

Major Results

FY2019 target

Financial Performance Targets

FY2020 target

Targetcontinuous
growth from
Phase 1

Ordinary income

FY2021 target

p27 Phase2 業績目標

Financial Performance■ Results (billion yen).

FY2016 actual

FY2017 actual

FY2018 targets

FY2018 actual

168.5 billion yen

170.1 billion yen

195.0 billion yen

212.3 billion yen

Gross profit(ratio)22.5 billion yen(13.4%)

25.0 billion yen(14.7%)

24.0 billion yen(12.3%)

31.6 billion yen(14.9%)

Operatingincome (ratio)

6.0 billion yen(3.6%)

6.5 billion yen(3.9%)

7.5 billion yen(3.8%)

10.6 billion yen(5.0%)

Ordinary income(ratio)6.8 billion yen(4.1%)

7.4 billion yen(4.4%)

8.0 billion yen(4.1%)

11.2 billion yen(5.3%)Net sales● Plan (billion yen)200.0 billion yen

11.2
9.0

Gross profit(ratio)30.0
billion yen(15.0%)

31.0
billion yen(15.5%)

32.0
billion yen(16.0%)

Ordinary
income(ratio)9.0
billion yen(4.5%)

9.5
billion yen(4.8%)

10.0
billion yen(5.0%)

6.8

2016

9.5

10.0

7.4

2017

Phase1

2018

2019

2020

2021

(FY)

Phase2SANKI REPORT 201927

Sanki Engineering’s Value Creation▶Financial and Capital Policies (raising medium- and long-term value)
Initiatives

Work load thattakes work stylereforms into
account
Generate
profits
Maintaining
and improving
profitability

Phase 2
Management
Targets▶Strengthen investments for future growth such as R&D, capital

Investments inthe future

investments, and education▶Set total return ratio as targets and return profits to shareholders in a

Return of profits tostakeholders

stable and continuous manner▶Return funds to business partners by improving payment terms andother means▶Continuously reduce strategic shareholdings▶Review the composition of equity capital and ensure the flexibility and

Improved capitalefficiency

Ordinary profit
margin
5.0% or higher(final fiscal year)

maneuverability of capital policies

Dividends
Annual dividends
per share of 60 yen
or higher

Acquisition oftreasury stock

Total return ratio

About 5 million shares(in 3 years)

70% or higher

ROE
8.0% or higher(final fiscal year)▶ESG Policies (Create Sustainable Social Value)
To implement sustainable management, we will continue efforts from Phase 1 during Phase 2 and pursue initiatives basedon our ESG policies toward creating a sustainable society and achieving sustainable corporate growth.
Policies

E

Environment

Initiatives▶ Contribute to decarbonization, energy saving, and▶ Develop products and technologies that

contribute to realizing a decarbonized society▶ Reduce the environmental impact ofbusiness activities

energy creation▶ Continue with “SANKI YOU Eco Contribution Points”▶ Reduce environmental impact associated with businessactivities▶ Build infrastructure and facilities in response to socialand environmental change▶ Contribute to building sustainable

S
Socialinfrastructure▶ Promote diversity to enhance humanresources▶ Create work environments that are safe andeasy to work in▶ Collaborate and engage with the local
community▶ Secure diverse personnel and nurture human resources▶ Promote work style reform (Smile Project)▶ Promote activities based on health and safety activities

plans▶ Promote efforts to enhance communication▶ Actively support cultural and sports activities▶ Engage with local communities around the Sanki

Techno Center and other sites

G

Governance▶ Continue efforts for better governance based on the▶ Reinforce the governance system

Sanki Engineering Corporate Governance Guidelines▶Contributing to the SDGs
The Sanki Engineering Group’s technologies areconnected to the 17 SDGs through the services
we provide to customers. Sanki Engineering willplay its part to address the medium-term social
issues laid out by the SDGs through its businessactivities.

Four Sustainable Initiatives for the Future01

Amenity

Creating comfortable environments
through engineering

03

Eco & Energy

Offering technological solutions to
help achieve decarbonization, energy
saving, and energy creation

02

Industry

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

04

Environment

Building facilities for water processing
and waste disposal to help protect theenvironment and create a zero-waste society

Learn about Sanki Engineering’s businessactivities and business foundation

Business Report
Facilities Construction
Business
Plants & Machinery
Systems Business
Real Estate Business

30
Page 34
Page 38
Page

Photographing with collaboration of Kanagawa prefecture

28

SANKI REPORT 2019

Business Report

Facilities Construction Business
Increasing Productivity to Continue Meeting Social Needs
The Facilities Construction Business has been increasing its value by creating comfortableenvironments in response to diverse social needs through total engineering, which
integrates the broad business areas encompassing HVAC, plumbing and drainage,and electrical and facility systems. As we look beyond the provision of comfortableenvironments, we are refining the quality of our technologies with a focus on savingenergy and reducing greenhouse gas emissions as solutions for global environmental
issues. Another urgent issue is higher productivity, given the rapidly aging population anddeclining birthrate in Japan, in order for the Facilities Construction Business to continue
growing and offering benefits to society for many years to come. We hope to overcome
these difficulties and offer greater reliability to our stakeholders so we can play our part inresolving ESG issues and achieving the SDGs.

Director, Senior Executive Officer and General Manager ofthe Mechanical & Electrical Contracting Headquarters

Net Sales and Net Sales Composition Ratio for Fiscal 2018

Orders Received (Billions of Yen)

Net Sales (Billions of Yen)

182.5

179.3

billion yen

151.1 149.9

84%
2014

2015

2016

2017

2018 （FY）

2014

2015

141.5 139.6

2016

2017

2018 （FY）

Market Conditions

Opportunities and Risks• Ongoing demand for construction, including replacement demand
and redevelopment for buildings constructed during Japan’s
period of rapid economic growth• Expansion in capital investment led by the manufacturing industry• Nationwide labor shortage resulting from a shrinking workforce• Rising need for decarbonization• Rising concern that the decrease in trained workers associatedwith demographic trends will result in a labor shortage and social
demand for addressing such working conditions as long work hours• Addressing disparities in economic conditions and demand
among regions• Growing demand for office management solutions based on
innovations such as AI and IoT• Expanded support by adding staff to the Design
and Engineering Support Center led to a large-scaleindustrial HVAC order.

• Across all Group companies in October: advanced
digitized, simplified documentation with an online
approval process by introducing recently developed
New Octopus software, and onsite documentation
assistance.
In addition, we continued to develop and introduce
solutions based on advanced ICT, which has recently
emerged as an increasing need in the construction
facilities industry. Specifically, we pursued 3D-CAD
projects using 3D scanners.
In 2018, on the 30th anniversary of the Facility
Systems Business and its track record in PM*1, CM*2,and smart building (instrumentation and ICT systems),
the number of orders increased for ICT solutions suchas security reinforcement and cloud services, with net
sales exceeding ten billion yen for the first time.

Facilities Construction Business150.0 152.4 146.6 153.4

179.3

The Facilities Construction Business received acontinuous flow of urban redevelopment projects
and robust demand from capital investments led bymanufacturers. In this business environment, wetargeted strategic orders focused on large-scale projects
while paying due consideration for the workload of
construction managers and consistent construction
quality. Also, we sought to steadily advance our ongoing
construction projects and secure profits.
This resulted in an all-round increase in orders
received year on year for building HVAC and plumbing,industrial HVAC, electrical systems, and facility systems
as well as an increase in the balance carried forward. In
particular, there was a considerable increase in orders
received for large-scale projects in the industrial HVAC
business, primarily led by HVAC systems for factories,
which exceeded the orders received in our mainstay
building HVAC and plumbing business. Net sales alsorose significantly, fueled by a second consecutive
year of increased orders received for industrial HVAC
systems. Moreover, we were able to secure very highprofit margins due to improved construction quality
resulting from our focus over the past few years on
the active deployment of ICT and reinforcement ofconstruction site support.
Here are a few of specific results of our Smile Site
Plan for reducing construction manager workload andraising operational efficiency.

Business Report

Eiji Mitsuishi

Major Results for Fiscal 2018

*1 Property management is a series of tasks that aim to increase the asset
value of individual real estate assets. For the Company, this particularly
relates to proposals to increase asset value through facility management.
*2 Construction management is a series of tasks for which a company iscontracted by the customer to manage entire construction work projects
from a neutral standpoint, to ensure that construction progresses
smoothly.

Major Projects◦Toyota Motor Corporation PI Tower Project◦ Nihonbashi 2-Chome Type-1 Urban Area Redevelopment
Project (District B), (Districts C & D)
◦NGK Ceramic Device Co., Ltd., Tajimi Plant◦Toshiba Memory Corporation, Yokkaichi Plant Building 260,
Stage 3, Stage 4◦ Fukuoka High and District Court/Family Court/Summary
Court Office

Key Initiatives of the Medium-Term Management Plan
Key Initiative01

Key Initiative

02

Key Initiative

03

Raising Productivity through Workstyle Reform
We will endeavor to boost productivity and secure our workforce by bolstering the support framework forconstruction sites under the Smile Site Plan, which is intended to reduce the workload of construction managers
as part of our workstyle reform.

Reinforcing Construction Capabilities and Enhancing Quality
We will standardize and enhance the quality of our construction technology by organizing a Group-wide
construction system that includes subcontractors and by effectively using the Sanki Techno Center.

Actively Using Digital Tools
We will raise construction quality and productivity by actively using digital tools, as represented by BIM*.
*The Building Information Modeling concept involves the construction of a database comprising a 3D model and attribute data of a building on acomputer and the application of that information across the entire process, from design and execution to progress and management.

30

SANKI REPORT 2019

Nihonbashi 2-Chome Type-1 Urban Area Redevelopment Project (District B)

Fukuoka High and District Court/Family Court/Summary Court Office

SANKI REPORT 201931

Facilities Construction Business

Policies and Outlook for Fiscal 2019

● Promote the Practical Use of Digital Tools that
Meet Customer Needs
The BIM Promotion Center, set up in April 2019, willlead the initiative for introducing and reinforcing the BIM
3D modeling method being adopted by the construction
facility industry. It will also promote its deployment
across branches and branch offices. We will strive
to implement BIM practically and in various phasesof our business, including design, construction work,
maintenance, and management, to enhance and further
standardize construction quality, reduce the burden
on construction managers, and reduce costs and risks
according to customer needs.
● Strengthen the International Business
The International Business Division will take the initiativein supervising and managing the Group’s overseas
companies, including the Plants & Machinery Systems
Business, while also strengthening them. Our focus will
also be on establishing the foundation for local bases tospread the Sanki brand overseas.

32

SANKI REPORT 2019

● Bolster and Expand the Scope of the Facility
Systems Business• Facility Systems BusinessWe are currently seeing prominent shifts in workstylereform and the revision of optimal organization andfacilities at financial institutions, which lead to the growing
need for project management in office restructuring andrelocation.
This is also a time of major change in terms of the needsof customers, as they explore more efficient workstyles using
ICT. In addition to NewSICT*1, Sanki Engineering will focus ondeveloping new consulting services.
• Smart Building
Building management solutions: instrumentation
We will provide central monitoring and automated control
systems that excel in operability, maintenance, andscalability. Presenting Sanki Engineering as a SI*2 with theexpertise and problem-solving skills cultivated throughits experience in facilities construction work, we will
expand the scope of the Building Management Solutions
Business.
• Network Solutions: ICT
In addition to building networks, we will seek to expand
into security and develop solutions related to IoT, AI, and
5G as well as form alliances.

High Quality Air Conditioning that Caters to the Diverse Needs of People in a Room

selFort™ ­–Smart Air Conditioning System for Offices –Relevant SDGs
Value Provided
by SankiEngineering◦Air volume control per outlet helps achieve higher productivity◦Energy savings during installation and change in interior layout◦Higher energy savings compared to conventional units

Large offices generally have a central air conditioning
system through which cool or warm air is distributedat once from the air conditioned room to multiple
outlets via air ducts. Room temperature is centrally
controlled by each unit with multiple outlets, making
difficult the adjustment of temperature for individual
outlets. However, sensitivity to room temperature
differs with each person depending on sex, age,and type of work, which has increased the need forindividualized adjustments since comfort affects
personal productivity.
Sanki Engineering has responded by developing the
selFort™ smart air conditioning system for offices. With
the system, cool or warm air from the unit is directedto the space above the ceiling and goes through a
compact, lightweight fan diffuser unit (FDU) installed in
the ceiling, which sends the required volume of air into
the room. Enabling users to adjust the air volume ofeach FDU using their computer, tablet, or smartphone,makes it possible to cater to diverse air conditioning
needs in response to individual sensitivities or activities
in a room. Since it requires no air supply duct, selFort™

has a simple FDU wiring structure and uses power line
communication capable of simultaneously transmitting
electricity and air volume control signals. This saves
energy during installation work without the need for
major construction such as relocating ducts to suit a newroom layout. Adding or moving outlets is easy, and since
the FDU sends only the necessary volume of air, as muchas a 7% reduction of power is expected, compared to theconventional VAV method, while turning off an unused
FDU will save even more energy.
The selFort™ system was released in December
2018 after verification tests using actual models at the
Sanki Techno Center. Looking ahead, we will continue topromote the “wellness office” toward realizing an evenmore advanced, comfortable air conditioning systemlinked to IoT and AI technologies.

Purpose of Building• Office building

Facilities Construction Business● Further Enhancing Construction Quality andProductivity
The Mechanical and Electrical Administration Office set
up in April 2019 will lead the initiative for developing
closer collaboration among branches and branch offices
and flexibly allocating personnel. We will also seek
to secure construction quality and raise productivity
by promoting workstyle reform through the TechnicalSupport Center and Smile Site Plan in order to bolster
support for construction sites and by effectively
deploying diverse human resources as part of ourinitiative to promote diversity.

● Food Service Equipment Systems BusinessWe will restructure the Food Service Equipment Business,a longstanding operation of the Sanki Engineering Group,
by making the maximum use of our accumulated planningand operational know-how as well as through collaboration
with Group company Sanki Techno Support. Our focus will
be on total engineering for food-related environments that
efficiently responds to customer needs.

Business Report● Strengthen the Core Businesses to Create
Sustainable Social Value
The Facilities Construction Business delivers facilities
that demonstrate high performance in maintaining
comfortable environments and manufacturing
environments. At the same time, it offers solutions
for customers from the perspectives of energy
conservation, maintenance and management, and BCP.
Strengthening the Facilities Construction Business isdirectly linked with the Sanki Standard, which aspires to“create comfortable environments through engineeringand broadly contribute to social development.”

Focus

Type of work
• Construction of HVAC
facility■ The selFort™ ventilation process*1 Next Work Style with ICT is a type of consulting using ICT in workstylereform.
*2 System integrator.

Net Sales Target for Fiscal 2019
(numerical forecast at start of fiscal 2019)163

billion yen
SANKI REPORT 201933

Business Report

Plants & Machinery Systems BusinessLooking to the Future with Our Customers and Meeting
their Needs with Engineering
The Plants & Machinery Systems Business comprises the Machinery Systems Business,
which provides conveyors and material handling systems, and the Environmental Systems
Business, which provides water treatment and waste treatment facilities. We contributebroadly to social development by creating comfortable environments through engineering.
Our products and facilities are infused with the proprietary technologies we have cultivatedover many years and are delivered with unique features as we respond to every customer
order with a fully customized solution. Our customers come to us with the need to save laborand promote automation as well as to save and effectively generate energy, all key social
issues in terms of achieving the SDGs. Our mission is to monitor these social issues closely,
listen carefully to what customers have to say, and lead the way to provide solutions.

Major Results for Fiscal 2018

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

Net Sales and Net Sales Composition Ratio for Fiscal 2018

Orders Received (Billions of Yen)
38.7

36.3

8.1

billion yen

16%

27.4
9.9

30.6

2014

24.2

19.6

2015

2016

2017

21.7

2018 （FY）

27.9

26.4

29.1

9.2

8.1

18.7

18.2

9.2

11.7

19.9

20.4

17.4

2014

2015

2016

2017

2018 （FY）

Opportunities and Risks• Timely development and commercialization of products that meetmarket needs• Recruitment of engineers to keep up with advances in AI and IoT,
and promoting the introduction of robots• System for ensuring reliability and assurance on quality• Japanese government policy for promoting PPP and PFI*, expansion
in DBO orders for waste treatment facilities, diversification inmethods for public-private collaboration following the revision ofJapan’s Water Supply Act• Continued demand for energy saving and energy creation systems
at water treatment and domestic waste plants

Key Initiatives of the Medium-Term Management Plan

Key Initiatives of the Medium-Term Management Plan

01

Key Initiative

02

Key Initiative

03

Developing New Markets for Material Handling
Systems for the Logistics Market
Strengthen sales activities focused on new products
targeting the logistics market.

Expanding Sales of Hybrid Facilities
Focus on increasing sales and expanding marketing
channels for hybrid facilities that combine conveyors androbots.

Improving the Efficiency of Our Production
System to Improve Productivity
Establish a new production management system andimprove productivity at the “Yamato Product Center,” a
new plant.

Key Initiative01

Key Initiative

02

Key Initiative

03

Seeking Further Expansion in Sales ofStrategic Products
Refine and expand sales of core products that meetenergy saving and energy creating needs.

Further Promoting the LCE BusinessConduct a collaborative Group effort to expand the LCE
business, such as upgrading, maintaining, and managing
water treatment and waste treatment plants.

Developing New Business Areas
Explore new business areas in which we can leverage ourproprietary technologies in the Environmental Systems
Business, such as biomass power generation plants andfacilities for treating pharmaceutical and medical wastewater.

*Public Private Partnership, which provides public services through public-private sector collaboration, and Private Finance Initiative, a major PPP method.

SANKI REPORT 2019

Shimojishima Airport

Major Product Development and Delivery◦CB II cross belt sorter (delivered in March 2019)◦Both-end knife-edge conveyor (developed in March 2019)

Major Projects◦Narita International Airport: works to expand the T1S#53
make-up conveyer and enhance BHS capacity◦Shimojishima Airport: BHS for the passenger terminal forinternational and domestic flights

Market Conditions• Social infrastructure investment in sewage works remains littlechanged, while investment in waste facilities expands• Persistent needs for energy saving and energy creation in boththe public and private sectors

Opportunities and Risks

Key Initiative

34

32.2

Environmental Systems Business

Market Conditions• Growing need to save labor and promote automation arising fromJapan’s declining birthrate and aging population• Advances in AI and IoT, and the proliferation of robots• Reshoring of Japanese manufacturers and expanding the logistics market

12.0

5.7

16.7

Machinery Systems Business

33.7

12.1

10.3

22.4

Net Sales (Billions of Yen)
Machinery Systems Business
Environmental Systems Business

Amid growing labor saving and automation needs
caused by the shrinking work force, and expanding
capital investment for logistics facilities, we sought toincrease orders for our standard conveyors throughsales activities geared to local needs. We also set up
a Solutions Division to expand sales of hybrid facilities
that combine conveyors and robots while actively
promoting sales activities premised on customizedorders. Moreover, we received our first order for the
CB II cross belt sorter, our new high-speed conveyor
and sorting device developed in fiscal 2017, making
significant inroads in the airport and large-scale
logistics facilities markets. As a result, we were able
to increase both orders received and net sales on
demand from companies in the food products market
and the electric and electronic components market aswell as logistics companies.
In November 2018, we began constructing the
Yamato Product Center, our new plant which is partof restructuring the manufacturing functions of theMachinery Systems Business.

Plants & Machinery Systems Business

32.2

29.9

Business Report

Machinery Systems Business

Policies and Outlook for Fiscal 2019
● Promote and Expand Sales Geared to Local Needs
To win more orders for our standard conveyors, we willseek to promote and expand marketing targeting local
needs while also developing new sales bases.
● Develop Packaged Deals for Hybrid Systems
In response to the diverse automation needs of thefood products industry, we will promote packaged
deals for hybrid systems and broaden our productlineup. To do so, we will increase the number of system
integrators who assist in the design and constructionof automation systems. At the same time, we will seekout subcontractors capable of handling the process fromdesign to production.

● Maintain Stable Operations at the New Machinery
Systems Plant
In August 2019, after construction of the Yamato ProductCenter wrapped up, we launched full-scale operations
there to boost the efficiency of our production system.
With this center as the main plant for conveyors, we willseek to ensure smooth operations and improve efficiency
to develop automated production processes and othernext-generation technologies.

Net Sales Target for Fiscal 201912

(numerical forecast at start of fiscal 2019)billion yen
SANKI REPORT 201935

Plants & Machinery Systems Business

Environmental Systems Business
Major Results for Fiscal 2018

Value
Providedby SankiEngineering

Rendering of the new combustible waste joint processing plant of
the Ohchi-Gun General Services Cooperative

Major Orders Received◦Ochi General Administration Association: works toconstruct common garbage incinerator◦Upgrade work for a sludge decanter facility of the Fukuoka
City West Wastewater Treatment Center● Promote LCE Business in Collaboration with Group
Companies
We will actively engage in government initiatives
funded by the private sector, such as the PPP/PFI and
DBO projects, primarily by working closely with Group
companies to leverage their strengths in operation
management, repair, and maintenance of wastewater
and waste treatment facilities. We will also secure stock
projects that are expected to generate stable long-term
income, such as those based on long-term operation andmanagement contracts that are projected to increase in
the future. Furthermore, we will promote and expand ourLCE business.
We achieved a full-scale entry into the market forwoody biomass gasification power generation in fiscal
2017 and will pursue new orders through Group-wide
collaboration as we explore the business fields of saving
and creating energy.

Most production lines for rice balls sold at convenience
stores rely on manual labor to pack the finished products
into food trays for transportation. Due to the labor
shortage, however, securing workers for production
sites has been difficult. This is a pressing issue for theentire industry, and Sanki Engineering has sought tooffer a solution by developing an apparatus in which
general-purpose robots replace humans in handling thesimple task of packing products.
We showcased a prototype at FOOMA 2018,
an international food machinery and technology
exhibition. Robots can pick up eight rice balls at once
and are capable of packing around 3,000 rice balls
an hour. Users can expect labor savings as well as
significant improvements in work efficiency. We are

36

SANKI REPORT 2019

Value
Providedby SankiEngineering● Increase Orders for Strategic Products
We will keep up our efforts to increase orders for strategic
products such as SANDEC G3, an energy-saving decanter
centrifuge for wastewater treatment facilities; AEROWING
II, an ultra-fine bubble air diffuser; and the turbocharged
fluidized bed combustion system. We will also bolster thedevelopment of products targeting the private sector, suchas the continuous heat sterilizer used to treat medical andpharmaceutical wastewater, for which we won our firstorder in fiscal 2018.

Net Sales Target for Fiscal 201923

(numerical forecast at start of fiscal 2019)billion yen

Rice Ball Packing Robots System
Relevant
SDGs◦Helps address the labor shortage◦Saves manual labor and raises efficiency

Environmental
Systems Business

Policies and Outlook for Fiscal 2019

R&D for Solving Problems at Production Sites

currently upgrading the prototype in a joint venture witha major packing equipment manufacturer toward earlycommercialization.

Plants & Machinery Systems Business

Demand in the area of public infrastructure such aswastewater and waste treatment facilities has shiftedfrom new construction to upgrades, maintenance, andmanagement.
In this context, we achieved steady growth innet sales by completing our backlog of large-scaleconstruction work and increased orders for strategic
products. We expanded our key LCE business by
successfully winning orders for large-scale generalwaste treatment facilities, including DBO projects, forthe third consecutive year.
As for the SANDEC G3 energy-saving decanter
centrifuge, our strategic product, we received asteady flow of orders for projects including largescale construction work. We now account for morethan 30% of the wastewater treatment facility market
in Japan. We have made headway in expanding
new fields of business as well. In addition tosteadily generating power based on woody biomass
gasification, we won our first order for a continuous
heat sterilizer for treating medical and pharmaceuticalwastewater.

Machinery Systems BusinessBusiness Report

Focus

Operation of a Pilot Plant in Thailand for a Verification Project Selected by the Japanese Government

DHS-based Minimum Energy Wastewater Treatment Unit

◦Improves hygiene in developing countries◦Lower cost of wastewater treatment and saves energy

The “DHS-based minimum energy wastewater
treatment unit” is a joint project undertaken by
Sanki Engineering, NJS Consultant Co., Ltd., Tohoku
University, and Nakaoka Technology University. It was
one of the technologies selected in fiscal 2018 under
the Wonder of Wastewater Technology of Japan,
spearheaded by Japan’s Ministry of Land, Infrastructure,
Transport and Tourism. Under the project, we built a pilot
plant in Khon Kaen, a regional city in Thailand, and havemaintained steady operations there.
In March 2019, a seminar was held in Khon Kaen,assisted by Group company Thai Sanki Engineeringand Construction Co., Ltd. A total of 90 participantsfrom the Thai government, local governments fromsurrounding regions, and universities listened intently tolearn about Japan’s latest technology. Our wastewater
treatment unit is easy to operate, maintain, and manage

Relevant
SDGs

and is expected to lower costs and save energy. It isa promising technology for developing countries facedby many diseases associated with insufficient sewage
treatment.

Seminar in Thailand

SANKI REPORT 201937

Business Report

Real Estate Business
Our Real Estate Business is engaged in leasing operations and building management while striving to increase the added
value of our properties.

Net Sales and Net Sales Composition Ratio for Fiscal 2018

Basic Strategies for
Fiscal 2019

Net Sales (Billions of Yen)
1.9
1.7

1.9

billion yen

1%

1.5

1.5

2015

2016

• Effective use of portfolio assets• Maintenance and managementof portfolio assets• Raise revenues from building
stock-based business byaccumulating leasing operations

1.2

2014

2017

2018 （FY）

Major Results for Fiscal 2018
In the office leasing market of the Japanese real estate
sector, we continued to enjoy robust demand led by
the Tokyo metropolitan area, while demand either
recovered or was little changed in the other four major
cities. In building facilities, there is a pronounced needto conserve energy and resources, extend the life of
aging buildings, and ensure longer life for facilities, andsolutions to these issues have emerged as key added
value in the office leasing market.
Under these circumstances, we pursued the STeP
Project for redeveloping the land and buildings we own
at the Sanki Yamato Site.
• In May 2018, we began leasing land at the former
Yamato Engineering Center to the Nippon Life
Insurance Company.

• We actively sought new tenants to enhance theoccupancy rates for the Sanki Yamato Building byrenovating the elevators and adding dining space.
• In October 2018, the Sanki Techno Center wascompleted and began operating as the core facility of
the Sanki Yamato Site.
• We sought to raise satisfaction for tenants at the
Molive shopping mall in Moriyama City, Shiga
Prefecture by recovering the flooring of the common
corridor and renovating the elevators.
As a result of these initiatives, overall net sales for theReal Estate Business rose from the previous fiscal year.
Major factors included an increase in rental income fromthe start of business at two new tenants in the Sanki
Yamato Building.

Learn about Sanki Engineering’s businessactivities and business foundation

ESG Initiatives

Policies and Outlook for Fiscal 2019
In fiscal 2019, we will maintain our efforts to increase
sales and profit for the Real Estate Business by applying
Sanki Engineering’s technologies and know-how to themaintenance and management of portfolio assets.
At the Sanki Yamato Building, we will continue
renovations on the elevator and also upgrade thepower receiving equipment. We will also undertake
facility renovations at the Molive shopping mall inMoriyama City, Shiga Prefecture to ensure a high level

38

SANKI REPORT 2019of satisfaction among tenants and shoppers.

Environment
Net Sales Target for Fiscal 20192

(numerical forecast at start of fiscal 2019)billion yen

SocialGovernance

40
Page 48
Page 69Page

E nvironment

ESG Initiatives
Environment

Established: April 1, 2015
Revised: April 1, 2017

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

◦ Protect the global environment by means of our exceptional technological capability◦ Minimize the environmental impact caused by our business activities

FY2018Providing products and services to help
reduce CO2 emissions of customers

Improve the introduction rate ofdigital manifests[ Primary Goals ]Achieve a greater reduction in CO2 emissions compared to fiscal
2017 through orders received for CO2 reduction proposals

20,699Introduction rate of digital manifests: 90%
Increase in introduction rate of digital manifests

Volume reduced in FY2018 (consolidated):

t-CO₂

t-CO₂

Assessment

91.4

Results for FY2018 (non-consolidated):

Results for FY2017(non-consolidated):

88.4

%

Assessment

Major Action Policy for FY2019
Providing products and services to help reduce CO2 emissionsof customers

40

SANKI REPORT 2019

Improve the introduction rateof digital manifests%●● Environmental Management System
We have obtained ISO 14001 certification and operate environmental
management systems at all Group company sites in Japan, including Sanki
Kakou Kensetsu Co., Ltd. and Sanki Kankyo Service Co., Ltd. Under our system
for implementing environmental management, headed by the president,
each division reports on the status of its activities, and decisions on actionplans are made during ISO Promotion Meetings and company-wide EMS andQMS secretariat meetings. Annual policies are approved by the Management
Meeting, comprising directors and other members.

Reference
Quality and Environmental Management System
P. 49

Our Contribution to the Global Environment

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

16,949ESG Initiatives Environment●● Promoting Environmental Management
At Sanki Engineering we believe that environmental problems represent
an important management issue and therefore promote environmental
management based on the Sanki Engineering Environmental Policy. We willcontinue to engage in environmental activities with a firm vision of the future
under the ESG policy laid out in our medium-term management plan. At thesame time we will make necessary revisions in response to regulatory trends
in Japan and overseas.

Sanki Engineering Environmental Policy

Volume reduced in
FY2017 (consolidated):

Governance

Environmental Management at Sanki Engineering

Our Contribution
to the Global
Environment

Important Issues

Social●● Major Activities in Fiscal 2019
We pursue our activities by having each section set environmental goalsaligned with their respective operations. Major policies for fiscal 2018 were:(1) Develop a better understanding of the ISO standard; (2) Thoroughly review
relevant laws, regulations, and ordinances; and (3) Improve the introduction
rate of digital manifests. In fiscal 2018, an external audit found no issuesof noncompliance and there were no violations of environmental laws or
regulations that warranted a fine nor any complaints related to issues such as
noise, dust, and odor at construction sites.
●● Assessment and Response to Environmental Risks and Opportunities
The 2015 version of the ISO standard calls for “visualization” as a requirement
listed under “Initiatives on Risks and Opportunities.” To address this, we use
the JOB Environmental Aspects Assessment List to identify environmental
issues that are unique to each construction site, bylaws governing site location,
regional agreements and more. There is an infinite variety to type, scope andregulatory requirements with respect to environmental risks, depending on
the project type, such as medical institutions and commercial facilities, andthe surrounding environment, community and nature of construction work.
The assessment list consists of 10 aspects and around 60 items, and, prior
to the start of construction, we seek appropriate action by conducting anenvironmental risk assessment for each project.

Environmental Aspects Assessed
under the JOB Environmental
Aspects Assessment List
1.	Use of resources andenergy2.	Reduction and proper
disposal of waste
3.	Abnormal situations andoutflow of contaminants
4.	Consideration for areas
surrounding construction
sites
5.	Consideration for uniqueenvironmental needs
6.	Natural disasters
7. Legal compliance●● Developing Environmental Leaders

We encourage employees to acquire environment-related qualifications in
response to regulatory changes. In particular, we plan to increase the numberof managers of special controlled wastes. With respect to our EMS, we
provide introductory training on ISO every year to new recruits as well as midcareer recruits. We also offer training to develop internal auditors qualified to
conduct simultaneous ISO 9001/ISO 14001 audits.

8. Other local bylaws
9.	Temporary materials andequipment, and office andother supplies
10. Other aspects

SANKI REPORT 201941

ESG Initiatives
Environment■■Number of Employees with Environment-related Qualifications (as of April 1, 2019)

Supervisor of management of industrial waste subject
to special control

Pollution prevention manager (cumulative total)

Consolidated

8

Non-consolidated

7

Consolidated

183

Non-consolidated

168

Consolidated

88

Non-consolidated

73

FY2016
Numbers CO2 reduction

I
VO

CE

FY2018
CO2 reduction

Consolidated

345

56,205353

47,905411

50,072

Non-consolidated

313

54,877

321

46,143370

45,531

Orders received
Consolidated

183

27,624

166

16,949183

20,699Non-consolidated

168

27,319157

16,599163

16,608■■ R&D Expenditures Related to Environmental Preservation

675.5(Millions of Yen)

624.5
424.8

323.9
214.1
Trans-Heat Container for delivering
thermal energy
2014

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

2015

2016

2017

2018

(FY)

●● SANKI YOU Eco Contribution Point System
We launched the SANKI YOU Eco Contribution Point System in October 2010.
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 theachieved emissions reduction is converted to Eco Contribution Points, which
are used to subsidize environmental conservation activities. In fiscal 2018,
customers adopted 183 of our proposals, resulting in donations of 2,069,900
yen (equivalent to a 20,699 t-CO2 reduction), raising the overall total of
donations since the start of the program in fiscal 2010 to 18,440,800 yen, withapproximately 16,000 trees planted, equivalent to an area of 5 ha or as large asthat of the Tokyo Dome.

Conserving the Global Environment with Sanki Technology
Our Award-Winning Project to Save Energy for an Entire Hot-spring District
In January 2019, Sanki Engineering and the Yunohama Hot Spring Source Facilities Co.,
Ltd. were jointly recognized for our energy-saving project for the hot-spring district in the
Yunohama area of Tsuruoka City, Yamagata Prefecture, receiving the Agency of Natural

Helping to Optimize the Energy Mix

Resources and Energy Director General Prize, which is part of the Energy Conservation
Grand Prize sponsored by the Energy Conservation Center, Japan.

I believe that Sanki Engineering’s Energy Solution Center has a major role to play in realizing an
optimal energy mix by 2030, the goal upheld by the Japanese government in The Fifth Strategic

In the past, hotels and ryokans in the area depended on fossil fuel as a heat source

Energy Plan. Specifically, we will focus our efforts on a biomass power generation project andfor supplying hot water and heating baths. We sought to replace this with unused heat

energy saving proposals as an officially-recognized ZEB Planner while also collaborating withfrom the hot spring in a project involving the entire hot-spring district. As a result, weeach business headquarter and the R&D Center on initiatives intended for the exchanging

saved 536 kl (crude oil equivalent), or 22% of the energy consumed by the whole town,of information as well as joint work with companies in other industries. We hope to play our42

Numbers

Our Contribution to the Global Environment• Registered ZEB Planner
Japan’s Agency for Natural Resources and Energy, under the Ministry of
Economy, Trade and Industry, is promoting the widespread introduction of
ZEBs*. Sanki Engineering is a registered ZEB Planner, a new category createdin fiscal 2017.
As a ZEB Planner, we will be the contact point for customers planning to
adopt ZEB in construction projects, and by supporting ZEB planning we will beplaying our part in developing a decarbonized society.

(CO2 Reduction Unit: t-CO2/Year)
FY2017
Numbers CO2 reduction

ProposalContributing through Our Products and Technologies●● Addressing Decarbonization
The drive to create a decarbonized society continues to gather pace. The target
stated in Japan’s Strategic Energy Plan of July 2018 is to reduce greenhousegas emissions by 26% from levels in 2013 by becoming a thoroughly energyefficient society by 2030. Meanwhile, guidelines for implementing the Paris
Agreement were adopted at the COP24 meeting in December 2018.
The Sanki Engineering Group seeks to enhance functionality and comfort
through the products and technologies offered by each of its businesses inorder to help customers save energy, reduce CO2 emissions, and cut lifecycle
costs and toward the ultimate goal of shifting to a decarbonized society. Our
pursuit of energy conservation and other means for reducing environmental
impact encompasses the entire product lifecycle, from planning and designin facilities construction to operational maintenance after completion and alsorenovation. To achieve even higher energy efficiency, our Energy Solution
Center leverages its accumulated technologies and know-how to support
proposals that meet the diversifying needs of our customers.

Governance

ESG Initiatives Environment

Certified environmental measurer■■Proposals for CO2 Reduction and Outcomes

Socialin fiscal 2018. Sanki Engineering was responsible for planning, designing, and building

part in developing a decarbonized society by leveraging our strengths as a total engineering

Hiroki Takai

infrastructure such as a centralized hot water supply system for the project, which wascompany capable of applying its technologies to broad areas of business.

General Manager,
Energy Solution Center

made possible through the united efforts of those in the Yunohama area and has attracted

SANKI REPORT 2019a lot of interest as an initiative that could revitalize regional communities.

SANKI REPORT 201943

ESG Initiatives
Environment

2.	Proposal
adoptedSanki Engineering

3.	Convert each ton of
reduced CO2 to 100 yen

4.	Donate theannual total

ESG Initiatives Environment

Customers
Propose using energy-saving
equipment to reduce CO2 emissions

Governance●● Initiatives in the Office• Energy Conservation Activities
Sanki Engineering has been promoting energy-saving activities in its offices.
In fiscal 2018, energy consumption was 2,026 kl, and CO2 emissions
generated by energy use was 3,813 t-CO2 on a non-consolidated basis. Energy
consumption rose significantly, by 28.1% from fiscal 2017, mainly due tothe start of operations by the Sanki Techno Center and R&D Center in fiscal
2018. Looking ahead, we will continue to reduce energy use across the SankiEngineering Group.

■■SANKI YOU Eco Contribution Point System

1. Propose
energysaving
solutionsSocial■■Energy Consumed by Offices (Crude Oil Equivalent)■ Group companies (kl)■ Sanki Engineering Co., Ltd. (kl)Environmental
conservation activity

1,643

1,589

1,800
104

1,696
115

2,026

1,696

2014

2015

2016

1,581

2017

2018

Our Contribution to the Global Environment• Donations to Tree-planting Projects
Recipients of donations were selected from the framework of global
environmental preservation activities mainly handled by private non-profit
organizations. In fiscal 2018, we donated to two projects in which our
employees participated.

2,133
107

(FY)

Participating in a tree-planting project for
the forest surrounding Shonan Village■■CO2 Emissions Generated by Energy Consumption at Offices■■Donation History for Tree-planting Projects

Recipient

Project■ Group companies (t-CO2 )■ Sanki Engineering Co., Ltd. (t-CO2 )Donation

Silva Association

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

NPO Mori wa Umi no
KoibitoTree planting for the Hikobae Forest
on Mt. Yagoshi (Ichinoseki City, Iwate
Prefecture)

3,402
1,000,000 yen in FY2018

Participating in a tree-planting project
organized by Mori wa Umi no Koibito■■CO2 Emissions at Construction Sites (Derived by Energy Consumption)

3,060

4,012
199

3,813

2014

2015

2016

2017

2018

(FY)

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

(Unit: t-CO2)

Proper Disposal of Waste

833

SANKI REPORT 2019

3,281
221

1,025,100 yen in FY2018●● Initiatives at Construction Sites
We strive to limit CO2 emissions generated by our business activities bycompiling and managing the emissions discharged at sites where SankiEngineering is the prime contractor.

44

3,589
212

3,377

Initiatives for Saving Energy and Resources in Business Activities

2014

3,174

746
537

525

2015

2016

●● Current State of Industrial Waste
465

2017

2018

(FY)

Note: T he significant decrease is dueto the completion of a large-scaleconstruction project in fiscal 2017.

With respect to industrial waste discharged at our construction sites, we seek
to understand the current status by compiling data on waste discharged atsites where Sanki Engineering is the prime contractor.
We have maintained the recycling rate for industrial waste, excluding
waste disposed at final landfill sites, at high levels above 90.0%, and the rate
was 97.8% in fiscal 2018. We will continue to promote proper disposal bymonitoring and analyzing the discharge of industrial waste.
In fiscal 2018, the waste disposal cost for construction sites was353,377,000 yen. Furthermore, we have been properly disposing waste CFC
and halons, the cost of which was 41,756,000 yen in fiscal 2018.

Explanation for handling CFC during HVAC
inspections

SANKI REPORT 201945

ESG Initiatives
Environment

In addition, following the revision of the Waste Management and Public
Cleansing Act, we created and distributed posters to disseminate the revisions
in storage and disposal procedures for waste containing mercury. We also
prepared a flow chart for the proper disposal of asbestos in order to addressneeds arising from an increase in renovation work.

SocialGovernance

ESG Initiatives Environment

Topics
Dispatching Engineers to the Japanese Antarctic Research Expedition

Construction of an HVAC and Plumbing Facility for the New, Basic Observation Building■■Waste Discharged at Sites where Sanki Engineering is the Prime Contractor and at the Sanki Techno Center■ Discharge by Group companies (t) ■ Discharge by Sanki Engineering Co., Ltd. (t)Recycling rate* for Sanki Engineering Co., Ltd. (%)

98.7

96.9

96.5

14,424

13,38017,9462,060

17,025
1,003

15,904

2014

2015

97.8

98.0

18,482
1,971

16,022

2016

2017

16,511

2018

Poster: “How to handle mercury-lacedindustrial waste”(FY)*Target rate: 90% or higher

With the aim of ensuring the proper disposal of industrial waste, we are pushingahead with the introduction of a digital manifest. In fiscal 2018, we completeda system for introducing digital manifests, which is now available to all
departments.
The rate of introduction of digital manifests to the total number of manifests
issued was 91.4% against the target of 90.0% on a non-consolidated basis infiscal 2018.
To comply with regulatory revisions obligating the use of digital manifests,
we will raise our target to 100% on a non-consolidated basis by fiscal 2020.
To achieve this goal, we will continue to reinforce our system for accurately
monitoring the status of disposal and recommend that business partners who
have yet to connect to the digital manifest system do so.

Mitsumasa Koike returned safely

expedition to Antarctica began in 1957, when we delivered roller

after spending two months

conveyors for the second expedition. Subsequently, when theat the Showa Base from mid-Protocol on Environmental Protection to the Antarctic Treaty was

December 2018 as a member

adopted and the principle of environmental protection becameof the summering party. Alongpart of the activities in Antarctica in 1991, we dispatched ourwith other work, Koike wasengineers for the first time to the 33rd expedition and began

responsible for constructing thepreserving the environment around the Showa Base.

HVAC and plumbing facility for

The expedition is composed of roughly 60 members divided

the Basic Observation Building,into either the summering or wintering parties. Waste andwhich is scheduled to open

wastewater are generated by the Showa Base, as various

in 2020 and will be used forobservations are conducted and as members live there eachobservations by researchers from the Meteorological Agency

day. Starting with a survey of actual conditions at the base, Sanki

as well as seismologists and biologists. During the expedition,engineers have been surveying waste, taking measurements,

we undertook construction work for the HVAC facility for theand surveying wastewater volume and quality as well as

first time since we began dispatching staff in 1991. The work

delivering, launching, maintaining, and managing the wastewater

included installing a boiler for the heater, an air conditioner, a

processing facility. In November 2018, two employees seconded

total heat exchanger, and a drainage tank. We also carried out

to the National Institute of Polar Research left for Antarctica withadjustments and maintenance for the HVAC and hygiene facility

the 60th research expedition (one for both the summering andof the summer camp used by expedition members.

wintering parties). This raised the total number of employees

Mitsumasa Koike

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

Our Contribution to the Global Environment●● Introduction of a Digital Manifest

Sanki Engineering’s relationship with the Japanese research

Looking ahead, we intend to offer wide-ranging support for

who had participated in the expedition to 15.

the Antarctic research operation through engineering.

Construction work around the air conditioner in the machinery room of the
Basic Observation Building

The sun never sets in Antarctica■■Rate of Introduction of Digital Manifests (Non-consolidated)

Rate of Introduction of Digital Manifests (%)

88.4
68.5

67.9

2015

2016

Target rate

100

91.4
Target
95.0

47.2

2014

2017

2018

2019

2020

(FY)

Note: The numbers were retroactively
revised to increase data accuracy.

Greeted by penguins near the base46

SANKI REPORT 2019

SANKI REPORT 201947

SocialESG Initiatives
Environment■■Exhibition Participation in Fiscal 2018

Exhibitions

3rd Smart Building Expo

selFortTM, S-Cloud®, SanBACS®

Strengthening guidance forconstruction managers
Conduct training on construction technology andmanagement for all applicants

Energy-related technologies and presentation of actual
cases
Explanatory presentation at the Company booth
AEROSTRIP

Waterworks Exhibition in Fukuoka 2018 (52ndWaterworks Exhibition)

Report on PFI Okubo, UV sterilizer

Initiatives to Ensure Quality■■Framework for Promoting the Quality and Environmental Management System

Top Management (President)

Total number of training participants

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

Assessment

CPCube , MREAL , MEDIFORT , low-temperature
steam sterilizer, mist spray sterilizer, AGV

World Water Congress & Exhibition 2018

ISO Promotion Conference

461

Sanki booth at ENEX 2019®

Nikkei IR and Investment Fair 2018

Reports on Company-wide activities anddecisions on plans Held in September 2018

% year on year®

Since April 2017, we have been operating an integrated quality management
system based on the ISO 9001 (QMS) and ISO 14001 (EMS) standards inour facilities construction, machinery systems, and environmental systems
divisions. In fiscal 2018, we held discussions on raising the efficiency ofsystem operations and improving our activities during the Company-wide QMS
and EMS Office Conference.

[ Primary Goals ]Actual number of problems and complaints®

●● Philosophy on Quality and the Quality Management System

FY2018Reduce the number of problems andcomplaints by 12%

Sewage Works exhibition ’18 Kitakyushu

Held in February 2019

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

Each
Divisional Managers
division (Heads of sections, general managers of the headquarters, chief director of the research institute, heads of businessdivisions, presidents of branches and branch offices)

Divisional Management Review

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

Quality and Environmental Management Officer
Assessment

Divisional QMS and EMS Office

Sales, Design, Production, Construction and Office Duties

Major Action Policy for FY2019
Reduce the number of problems and complaints
during construction per year

48

SANKI REPORT 2019

Ensuring Quality and Enhancing Technologies◦ More effectively respond to increasingly sophisticated and diversified customer needs◦ Enhance the accuracy of quality management ◦ Improve construction quality and pass on technologies

Reducing the number of problems andcomplaints during construction per year

Exhibited Items
Supercharged fluidized bed incinerator, AEROWING,
SANDEC G3, and a demonstration of the flow fluctuation
tracking type wastewater treatment technology using a
DHS system commissioned under the B-DASH Project

INTERPHEX OSAKA—5th International
Pharmaceutical R&D and Manufacturing Expo
Osaka
ENEX 2019—43rd Exhibition for Harmony
between the Global Environment and Energy

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

14

ESG Initiatives Social

The Sanki Engineering Group actively participates in exhibitions to introduce
customers to our unique technologies and open up new sales opportunities.

Basic Principle

Reduced byGovernanceCommunication with Our Customers

Ensuring Quality
and Enhancing
Technologies

Important Issues

SocialStrengthen guidance for construction managers

WEB
ISO 9001 Scope of Accreditation
https://www.sanki.co.jp/en/csr/
stakeholder/●● Quality Management Activities
We advance construction quality with an emphasis on improving
communication. Enhancing our support for construction sites and offering
rapid, constructive responses to problems and complaints are areas in which
we consistently seek to raise our standards.

SANKI REPORT 201949

ESG Initiatives
Environment■■Customer Satisfaction Survey (FY2017)

Facilities
Construction
Business*1
Environmental
Systems
Business*2

Highly satisfied: 57%

80 points or higher: 38%

Somewhat satisfied: 35%

70 to 80 points: 52%

Normal: 8%
Somewhatdissatisfied: 1%
Highlydissatisfied: 0%
65 to 70 points: 10%
65 points or lower: 0%*1	Compiled from customer satisfaction
data based on the final handover report.
*2	Compiled from customer satisfaction
data based on the construction work
performance rating.

We share our quality-related experiences across the Company by meansof technical documents in order to prevent the occurrence of incidents andcomplaints related to quality or, in the event they do occur, to handle themquickly and effectively.
Information about problems and complaints are distributed to constructionengineers through a flash bulletin, the “weekly bulletin” (a weekly meetingof the Problems and Claims Evaluation Committee, which is also attended byGroup companies), and the “monthly bulletin,” which discusses the causesof issues, corrective measures, and preventive measures. We have been
seeking to reduce the number of problems and complaints by 15% year on
year. We attained our target in fiscal 2018 by carrying out priority management
during the busy season to provide a focused response. In fiscal 2019, we willcontinue to pursue quantitative targets while strengthening our response.

復旧忘れにご用心！！
復旧忘れにご用心！！
復旧忘れにご用心！！

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

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

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

Quality check by quality assurance
administrator

Ensuring Quality and Enhancing Technologies●● Sharing Information and Preventing the Occurrence of Problems and Complaints●● Supporting Design and Technical Operations
The Design Support Center provides five branch offices with design and technicalassistance. In fiscal 2018, the scope of its support was expanded to include
areas such as building HVAC and plumbing in addition to industrial HVAC. In fiscal
2019, the center will continue to pursue higher design quality by conducting onthe-job training to raise the design capability of members and by proposing newtechnologies and providing information.
The Technical Support Center, which serves the five branch offices, was set
up in April 2018. We seek to reduce the burden on construction managers by
allocating operations preceding construction work to each relevant department.
In fiscal 2019, we will disseminate successful practices across departments andconduct hearings of on-site staff to prepare for the full-scale launch of supportive
operations.
Under the Quality Assurance Administrator Office, highly skilled former officemanagers work as quality assurance administrators and technical experts, who visit
construction sites to conduct construction audits and quality reviews as a meansof improving quality and preventing problems and complaints while also mentoring
junior employees. Moreover, we set goals each year to reduce problems andcomplaints as an ongoing initiative while also thoroughly disseminating information
across the Company by issuing and sharing technical memos.
Such support has enabled us to keep the number of problems and complaints
below target and to maintain quality, even though the number of construction
projects is on the rise. We will bolster the system of support and continue todevelop an environment that helps with the management of construction sites.

Governance

ESG Initiatives Social●● Understanding Customer Satisfaction and Utilizing Feedback
In an effort to maintain quality, we conduct a customer satisfaction survey atthe completion of construction work and reflect the feedback in our operations.
In fiscal 2017, the survey was carried out based on revised assessment
criteria, and we received highly positive feedback from over 90% of the 627
respondents. We revised the content yet again in fiscal 2018 to obtain more
specific feedback and began applying the new format in fiscal 2019. Looking
ahead, we will continue to incorporate customer opinions into our operations
to enhance construction quality.

Social■■Site Support System for the Five Branch Offices

Targeted Site

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

Note: After consultation with the branch
office, each supportingorganization provides assistanceto the selected site.

Supporting Organizations and Areas of Support

Planning

Design Support
CenterDesignArea of support:

Contracts

Procurement Division

Technical Support Center

Quality
Assurance
Administrator
OfficeArea of support:

Area of support:

Area of support:

Start of construction

Procurement

DesignTechnology

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

Quality

Construction work

Initiatives on Quality Based on Support for Construction Sites

Completion●●  Providing Operational Support for Construction sites
To reduce the workload on construction managers and enable them to spend
more time on construction work and quality management, and to maintainhigh quality, we provide operational support from the perspectives of site
documentation as well as design and technology.

Enhancing Our Technologies●● Technical Awards for Improving Construction Methods and Operational Processes●● Supporting Site-Documentation

To reduce the burden of administrative work at the construction site, the SiteDocumentation Support Center began providing centralized support in fiscal
2015. After raising efficiency and promoting the work-sharing approach, thecenter was dissolved in fiscal 2018. Its operations were handed over to eachbranch and branch office, and the Labor Safety, Health, Quality Management& Environment Promotion Office has continued to support site operations. We
are also raising the efficiency of our operational processes by sorting, reducing,and digitizing documents used at construction sites.

50

SANKI REPORT 2019

Site-Documentation System(Octopus)•	A new version was deployedin October 2018
•	Electronic approval of inhouse documents•	Unification of document
format•	Visualization of circular
reporting routeIn fiscal 2017, we began presenting awards for excellent ideas that improve
operational processes, such as raising efficiency, in addition to ideas that
improve construction work. As a result, we received 1,470 applications in fiscal
2018 and presented 5 awards for improvements in construction methods andoperational processes as well as 3 Contribution to Customers Awards.
●● Fostering Human Resources to Sustain Our Technological Level
The Sanki Techno Center fosters human resources by helping employees
acquire basic skills, brush up on skills, and attain qualifications. New
employees receive four and a half months of basic training and safety training.
Training for new employees

SANKI REPORT 2019

51

ESG Initiatives
Environment

SocialGovernanceSocialSecuring Healthand Safety■■Changes in the Number of Personnel with Quality-Related Qualifications (Totals as of April 1 for Each Fiscal Year)

FY2018

Qualification

FY2019Non-consolidated Non-consolidated

Professional engineer

Consolidated

92

97

104

1,112

1,134

1,272

Architect

42

42

46

Facilities construction architect

210

214

228

Electrical engineer

153

154

208

Project management technician (civil works/
construction/electrical construction/pipe-laying work)

29

27

37

284

295

305

Fire protection engineer

683

677

752

1,659

1,672

1,891

Health and Safety Policy and Structure

Note: Cumulative figures are shown for all
qualifications.

■■Major Skill Development Activities for Fiscal 2018

Initiatives

Initiatives at the
Sanki Techno
CenterInitiatives forpassing ontechnology

Training

Details of Training• 	Education for new businesspersons,61 participants
basic skills

Correspondence
course for attaining
qualifications•	Exam preparation for employees
who want to be managing engineers
163 participants
and for building, mechanical andelectrical engineers

Training basedon operational
experience*
Third year inconstruction work
Sixth year inconstruction work•	9 to 10 day training held at 3-year
intervals•	Standardized group-based training
according to operational experience•	Technical training using actual
equipment and mock-ups

2 sessions
57 participants

On-the-job training
by technical experts•	Practical on-the-job training offeredby technical experts selected fromall branches who participate in
onsite commencement discussions
and construction audits

20 technical experts
2,674 site visits (cumulative
total)

Conferenceon electricalconstruction quality
for all branches•	Test of practical skills for electrical
technicians from subcontractors of
all branches, written exam basedon past cases. Participants receive
the internally certified qualification,
Sanki Engineering-certified Class A
Electrical Engineer

18 subcontractors
19 participating technicians•	Introduce cases at briefings andliaison meetings held at branches
and branch offices

Number of sessions
Tokyo branch: 6
Kansai branch: 20
Chubu branch: 11
Hokkaido branch office: 3
Hokuriku branch office: 4
Chugoku branch office: 3
Tohoku branch office: 2

Initiatives
for Groupcompanies andsubcontractors
Explanation ofproblems andcomplaints

Action Policies for Fiscal 2019
Reducing the number of problems and complaints during construction peryear will be our ongoing action policy, with the aim of reducing such cases by
15% year on year. We will also seek to increase our support for construction
sites in both administrative and technical aspects. We will make better useof the Octopus site-documentation system while setting up a new dedicateddepartment for promoting greater use of BIM. Furthermore, we will pursue
initiatives that enable us to maintain high productivity and guarantee quality.
52

SANKI REPORT 2019WEB

Results

Training for new
employees

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 andimplementation of remedial and preventive actions.

Securing Health and Safety

Chief electrical engineer
First class instrument engineer

Qualified managing engineer

ESG Initiatives Social

We provide a three-stage program for construction managers based on thelevel of each individual’s skills in design, construction engineering, construction
management, and other areas. We will enhance our engineers’ skills by
improving hands-on practice and drills using actual machinery and facilities at
the Sanki Techno Center.

Initiatives for Safety
https://www.sanki.co.jp/en/csr/safety/

Important Issues◦ Rising demand in the construction industry ◦ Shortage of construction workers and the aging and shrinking of the skilled workforce◦ Growing risk of work accidents due to overworked laborers or lack of experience

FY2018*Started the training for the ninth year inconstruction work in 2019.

Implementing Measures toAchieve Zero Accidents
Continue the campaign forpreventing the three major
categories of accidents

12%

Implement Accident
Prevention Measures for
Subcontractors

Continuation of Health and
Safety Training[ Primary Goals ]Measures for preventing accidents
involving inexperienced workers• Visits to
subcontractors

263
46 44

• Health and safety training sessions
for employees and subcontractors

companies

reduction from theaverage for the past
three years

Assessment• Ratio ofaccidents
involving
inexperienced
workers

FY2017%

Assessment

Promote training and guidance on
topics such as the use of ICT%167
FY2017178• Transmission of a video message
and other information
Assessment

Major Action Policy for FY2019
Implement measures to achieve zero accidents

Bolster site-support systems

Continue health and safety training

SANKI REPORT 201953

ESG Initiatives
Environment

SocialThe selection of Osaka to host the 2025 World Expo has led to expectations
the event could somewhat remediate the economic slowdown anticipated
to follow the Tokyo Olympic Games. However, even as construction demand
continues to rise, the labor shortage has worsened, increasing the urgency
for securing engineers and skilled workers, raising operational efficiency, andaddressing the risks of industrial accidents, long working hours, and mental
health issues, associated with the labor shortage and decline in experienced
workers. Regulations governing equipment for preventing falls, requiring
preventive measures and special training on falls/tumbles were revised in
February 2019. In addition, the Ministry of Land, Infrastructure and Transportlaunched the Construction Career Up System, for the purpose of securing andcultivating competent personnel, in April 2019.

Type

Number of Participants (from Subcontractors)
2,475 (1,771)
372

(223)

Training with virtual reality technology

In-house health and safety training

235

(—)

●● Key Items Implemented in Fiscal 2018
In fiscal 2017, although we were able to achieve our reduction targets for
accidents in the “falls/tumbles” and “caught/pinched” categories, as well
as for traffic accidents, they are still occurring at a high rate. Many of theaccidents have involved inexperienced workers and primary subcontractors
who were not members of the Cooperative Association. Accordingly, in
our slogan and key actions, we emphasize the need for construction sites,
subcontractors, and Sanki Engineering to work together to improve measuresfor preventing accidents that frequently occur as well as our system forproviding safety training to all staff, including those of subcontractors.

Other client-focused training

1,197 (1,159)*Limited to training by in-house
instructors, not including training at
designated educational institutions.

Total

4,279 (3,153)

Right:	Sticker conveying the “Three asOne” message
Left:	Poster with a QR code that links toa video message

Policy of the Central Safety and Health Committee Chairperson

Key Actions
Safety1. Deploy measures to achieve zero accidents• Continue our campaign for preventing falls/tumbles, caught/
pinched accidents, and traffic accidents
2. Implement accident prevention measures for subcontractors• Measures for preventing accidents involving inexperienced
workers and younger workers• Instill a thorough understanding of the importance andnecessity of work reports• Bolster the leadership skills of foremen and safety managers• Develop the follow-up assistance systems provided by eachbranch, branch office, division, worksite, and subcontractor

3. Continue health and safety training• Provide e-learning programs for all employees• Provide health and safety training for Sanki Engineering’s
construction managers• Conduct practical drills during specialized training and otherprograms• Reduce the burden of health and safety operations throughthe Smile Site Plan
• Effectively use ICT in educational and instructional settings• Provide safety experience training at the Sanki Techno
Center
Health
1. Promote the Smile Safety and Health Plan
• Prevent health disorders and promote mental health●● Accidents during 2018
In 2018, 9 accidents occurred (1 lost workday accident, 8 with no lost workdays),
and we were able to reduce incidents from the previous year. According to ouranalysis, 50% of the accidents involved inexperienced workers, which reflects
a persistent challenge for us. Even though efforts to prevent the three major
categories of accidents have proven effective, results have remained unchanged.
While the number of serious accidents has fallen, there was an increase inminor accidents. The results show that in addition to preventing the three major
categories of accidents and bolstering preventive measures at subcontractors,
providing safety education related to minor accidents is also key.
■■Number of Accidents, Frequency Rate*1, and Severity Rate*2■ 災害件数● Frequency rate for Sanki Engineering ● Average frequency rate for the general construction industry◆ Severity rate for Sanki Engineering ◆ Average severity rate for the general construction industry■ Number of accidents
0.91

0.92

0.50

0.74
0.21

0.07
0.05
6

0.81

0.64
0.11

0.18

0.30
0.10
0.00

0.02

0.06
8

1.09

0.86
0.69

0.03
7

8
1

2014

2015

2016

2017

2018

(year)●● Safety and Quality Conventions and Safety Patrols

Every year in June, the preparatory month for National Safety Week, SankiEngineering holds safety and quality conventions at each branch, branch
office and division. In fiscal 2018, the president and Central Safety and HealthCommittee chairperson attended the convention for all offices. We also
conduct special joint safety patrols, during which the president and directors
tour 37 construction sites in the summer and before and after year-end.

Scope: Sanki Engineering construction
sites (Sanki Engineering Co., Ltd. andbusiness partners)
Number of accidents: interrupted work for
one day or longer (number of accidents
shown in the graph reflects the numberof victims, which was used to calculate
accident frequency and therefore does
not correlate with the number previously
cited on this page)
Source for average frequency rate andseverity rate for the general constructionindustry: Survey on Industrial Accidents,
Ministry of Health, Labor and Welfare*1	Frequency rate: calculated as thenumber of deaths and injuries causedby accidents in the construction site
per one million working hours; thisfigure indicates the frequency withwhich accidents occur.
*2	Severity rate: calculated as the numberof lost workdays caused by accidents
in the construction site per one
thousand working hours; this figure
indicates the severity of the accidents.

Action Policies for Fiscal 2019

Safety patrol by the president

SANKI REPORT 2019

Securing Health and Safety

Initiatives in Fiscal 2018

Health and safety training for foremen

Slogan“Happiness comes to a smiling workplace, so maintain our safety culture into the future—Let each of us help to disseminate the Smile Health and Safety Plan”

54

Safety card game created by young
employees■■Number of Participants in Health and Safety Training (Fiscal 2018)*

Special education and other courses

Outline of Activities in Fiscal 2018

ESG Initiatives Social●● Health and Safety Training
For our own employees and for staff employed by subcontractors, SankiEngineering provides training led by in-house instructors or at designated training
institutes. Using the facilities at the Sanki Techno Center, we held special training
sessions involving aerial platforms and full harness-type equipment with the aimof preventing falls. For newcomers to the construction site, we distribute healthand safety handbooks and organize joint training sessions with the Sanki Healthand Safety Cooperative Association.
Growing construction demand has led to an increase in foreign workers. As in
the previous year, Sanki Engineering spent twice as much time than its statutory
obligation to provide a safety seminar through an interpreter for 13 Vietnamese
technical interns at a subcontractor.

Health and Safety Environment of the Construction Industry

GovernanceIn view of the latest developments in society and industry, and the types ofaccidents that occurred in 2018, we are focusing on the following key action
areas for safety in fiscal 2019: (1) Deploy measures to achieve zero accidents,(2) Bolster site-support systems, and (3) Continue health and safety training.
We will utilize the Sanki Techno Center as we undertake these actions.

SANKI REPORT 201955

ESG Initiatives
Environment

SocialThe procurement cost of materials and equipment used by Sanki Engineering
for construction work is approximately 39 billion yen, with domestic suppliers
representing the source for nearly all procurement.

◦ Thoroughly ensuring equal, fair and transparent transactions◦ Quality improvement through cooperation with business partners

FY2018Exchanging opinions withbusiness partners

Strengthening cooperation
through subcontractor groups[ Primary Goals ]Digitize operations(work style reforms)

85

Percentage of digitized operations% or more
Assessment

Maintain the optimal procurement
environment

45

Exchanged opinions withcompanies
Assessment

Expand the scope of participation
for the nationwide

19

liaison meetingcompanies
Assessment

Major Action Policy for FY2019
Digitize Procurement Web(ordering) verification function
on iPadEnhance the entire Procurement
Web system

SANKI REPORT 2019

Exchange opinions with business
partners (twice a year)

Number of participatingcompanies: 19●● Thoroughly Ensuring Fair and Transparent Transactions
To build and maintain equal, fair and transparent relationships with ourbusiness partners, we develop and distribute an order procedure manualthat prohibits the abuse of a superior bargaining position and strive to ensure
thorough compliance by providing employee education each year. Upon
starting business with a new company, such as a construction subcontractor,
materials manufacturer, agent, or expense-related business partner, we assign
a business partner code based on objective standards covering various areas,
including the registration status of quality and environmental management
systems, financial conditions, procurement track records, delivery, pricing, andresponse to problems and complaints. In addition, the provisions of a basic
sales contract include product safety, quality control, intellectual property, legal
compliance, and the exclusion of anti-social forces.
●● Execution of Action Plans
Reducing costs and improving our profit ratio are important initiatives in our
new medium-term management plan, and to this end we helped negotiate
prices for all offices and manage procurement-related information forthem as well through centralized purchasing and price surveys as well as
announcements.
We are moving forward with work style reforms by improving operational
efficiency through digitization. In fiscal 2017, divisions related to technology
and procurement at all offices began digitizing their ordering process.
Moreover, we began digitizing claim forms for completed work in November
2017. In fiscal 2018, the number of processed forms reached about 85%, and
we also started using iPads for acceptance inspections to boost efficiency.
Upon digitizing the forms for ordering and completed work claims, we held
an introduction briefing for our business partners and created an instruction
manual. The transition resulted in improved convenience for those partners
and a significant decrease in the number of inquiries received at each branch
office and branch responsible for internal operations. After introducing digitizedordering, procurement division staff from the head office visit each office andexchange opinions on improvements. This meticulous follow-up has led to
exceeding our target for the number of additional companies that supported
digitization in fiscal 2018 by more than 3.5 times. Looking ahead, we willcontinue to work on making our procurement activities more efficient tocontribute to our work style reforms.
●● Exploratory Visits to Business Partners
In fiscal 2018, we began exchanging ideas with the Procurement Web usersof our major business partners at each office during joint reviews. In regard
to manufacturing-related procurement, our procurement department staff
visited suppliers and exchanged ideas about management status, delivery
date confirmation for products to be procured, BCP compliance, and similar
concerns. We will continue these visits and conversations to maintain an
optimal procurement environment.

Supply Chain Management

The Sanki Engineering Group Code of Conduct and Action Guidelines stipulate that we engage in fairtransactions with all business partners. We promote free market competition and conduct business in goodfaith and in accordance with the relevant laws and individual contracts. Under these principles, we endeavor
to build trust with our business partners to jointly provide high-quality systems and services to customers.

Further enhancing
procurement efficiency

ESG Initiatives Social●● Overview of Procurement

Basic Principle

56

Governance

Building Fair, Equal and Transparent Business Relationships

Supply Chain
Management

Important Issues

SocialInstruction manual on digitization forbusiness partners

Briefing on invoice digitization

An exploratory visit to a business partner

SANKI REPORT 201957

ESG Initiatives
Environment

addition to monthly liaison meetings, we implement joint labor-saving projects
and hold seminars to enhance technical skills and thoroughly enforce quality
management and supervision of safety and health at construction sites.
Moreover, we review the status of safety and health management andoffer guidance by organizing safety and health education as well as courses on
obtaining qualifications led by Sanki Engineering employees, and by conducting
joint patrols. We had previously held the Liaison Meeting for Subcontractor
Groups twice a year but dissolved it and held the Sanki Engineering Safety
and Health Meeting for Subcontractor Groups in December 2018. Led bysubcontractors facing high disaster risk, the meeting is expected to raiseawareness about disaster prevention. It was attended by 25 employees from
our Group and 19 from subcontractor groups, with our chairman and president
also in attendance. In future, we will organize the system for full-scale
operation and continue striving to build business partnerships.

■■Outline of Main Training Sessions (FY2018)

No. of Sessions

Theme
General procurement

4

Basic knowledge of accounting

1

CSR procurement (by external lecturer)●● Sanki Super Meister System
The Sanki Super Meister System certifies and commends foremen of Group
subcontractors whose superior construction techniques have significantly
contributed to elevating the quality of our construction work. In fiscal 2018,
14 foremen were certified. In fiscal 2015, we began rewarding subcontractors
to which the foremen belong with subsidies designed to encourage
further quality improvements, from the standpoint of promoting consistentcontributions to quality improvements at construction sites.

•	Background of spreading CSR procurement•	Necessity of CSR procurement•	Approaches●● Handling Anti-social Forces
Sanki Engineering is committed to eliminating anti-social forces from its
procurement activities. We clearly state this as a precondition for doing
business with us and request that business partners submit a letter pledging
to sever any ties with anti-social forces. As of March 31, 2019, we havereceived pledges from 3,772 companies.
●● Operation of Internal Whistleblowing Hotlines
We operate the Corporate Ethics Hotline to prevent any improper transactions.
Also, we are striving to conduct fair transactions with our business partners byproviding them with information on how to use the hotline and asking them inletters for their cooperation in ensuring that business activities are sincere
and fair.

●● Sanki Best Partner Program

Reference
Whistleblowing System
P. 7 5

V●● Sanki Techno Center
The Sanki Techno Center is a comprehensive training and research facility
that our subcontractors can also use. By sharing and developing high-quality
training, we will improve technology, construction quality, and safety and also
strengthen mutual cooperation.

C E Practice of Technical Guidance that Leads to Trust at Construction
I
O
Sites

In response to a request from the Sanki Techno Center, I have been offering technicalguidance training there since April 2019 as a skilled technician certified by the Sanki Super
Meister. I mainly provide practical technical guidance with a focus on basic techniques thatare indispensable at construction sites, such as screwed piping, pipe cutting, and lathes. I try
to teach in a polite and easy-to-understand manner to raise safety awareness of the workers
onsite. Employees of Sanki Engineering and its subcontractors in various industries teacheach other as well, which encourages them and deepens trust at the sites. Looking ahead,●● Joint Improvement Activities with Subcontractor Groups

SANKI REPORT 2019●● Support System for the Acquisition of Qualifications
To support subcontractors in upgrading their technical skills, we subsidize theacquisition of qualifications. Since fiscal 2016, we have been publicizing the system
during Central Safety and Health Committee meetings to encourage its use.
●● Technical Guidance from Subcontractors
Our new employee training also provides technical guidance fromsubcontractors. Moreover, skill training from subcontractors for new
employees is offered at the Sanki Techno Center. This collaborative approach
to training helps us to maintain cooperative relationships with subcontractors.

●● Providing 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 assessment of their safety management. We visit and provide
them with feedback on the results and exchange information on improvements
as needed to enhance their safety management capabilities.

58

Sanki Super Meister awards ceremony

The Sanki Best Partner Program was established to commend subcontractorsthat have significantly contributed to the development of the Sanki EngineeringGroup. In fiscal 2018, we presented the award to 129 companies during safety
and quality conferences held across the country.

Strengthening Cooperation with Business Partners

Sanki Engineering has established subcontractor groups at each branch, branch
office, and division as part of our effort to bolster our construction system. In

Liaison Meeting for Subcontractor Groups

Supply Chain Management

46

Content•	Basic knowledge about air conditioning, sanitation, andelectricity•	Learning basic knowledge about procurement items•	Basic knowledge about accounting•	How to read financial statements•	Compliance•	Measures for the 10% consumption tax revision

Governance

ESG Initiatives Social●● Seminars and Training for Procurement Staff
We organize seminars and training as needed to promote appropriate
procurement activities and enhance the purchasing and negotiating skills of
procurement staff. In addition, we encouraged procurement staff to obtainregistered qualifications for certified procurement professionals (CPP),
construction business accountants, and fundamental information technology
engineers, among others, to enhance their skills and knowledge. Furthermore,
to improve understanding of CSR procurement, we held a study session led by
an external lecturer, with 13 participants.

SocialSeminar for trainees from a Thai
subcontractor

I will strive to make more improvements and enhancements every day so that we, as a

Akihiro Igarashi

subcontractor, as well as our quality, will continue to be regarded highly.

Sankyo Corporation

SANKI REPORT 201959

ESG Initiatives
Environment

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

◦ Promoting diversity◦ Developing and appropriately allocating human resources◦ Creating a comfortable working environment

FY2018Implementing training programsfor boosting overall levels as aculmination of the final year of themedium-term management plan
Implement training programs
tailored to the characteristics of
employees

Offered programs forovercoming individual
weaknesses and developing
strengths
Assessment

Improve internal
communication

Implementing measures
under the Smile Project[ Primary Goals ]Hold opinion exchange sessions
with the president

Increase the paid leave ratio

Held opinion exchange sessions
with the president (15 times)

Paid leave ratio (non-consolidated)

100

Approximately

53.7
FY2017

employees
participated

Assessment

%

55.9

%

Assessment●● Respecting Diversity in Employment
We seek to bring on board human resources that differ in gender andnationality as well as in talent and personality. Staff from the sales, design,technology, and other divisions join the Human Resources Department toensure fairness based on multiple perspectives. As of April 1, 2019, 22
people from China, Peru, South Korea, Thailand, Vietnam, and the U.K. areworking with us, of which 5 are women and 17 are men. Under our mediumterm management plan, we will continue to hire foreign nationals so that we
steadily develop our overseas operations and promote diversity.
●● Promoting Women’s Careers
We believe that creating opportunities in which our female employees canfurther demonstrate their talents would lead to the sustainable growth of theCompany and in turn boost our corporate value. We are therefore working to
upgrade our personnel system and enhance various programs.
In addition, to create an environment in which our female employees cancontinuously develop their careers based on the Act of Promotion of Women’sParticipation and Advancement in the Workplace—commonly referred to as
the Act for Promoting Women’s Careers—we have formulated the following
action plan and are pursuing various measures to promote women’s careers.

Expand programs foryoung people

SANKI REPORT 2019

Improve internal communication

Action Plan Based on the Act for Promoting Women’s Careers
1. Plan period: April 1, 2016 to March 31, 2021
2. Goals
Goal 2:	Actively assign female career-track employees in the sales department and double thecurrent ratio.

Implement measures under the
Smile Project

P. 7 5

Reference
Compliance Awareness Survey
P. 7 7

Employees working at THAI SANKI
ENGINEERING & CONSTRUCTION CO., LTD.

Measures for Promoting
Women’s Careers

FY2014

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

FY2015

Launched and continued
diversity training for generalmanagers and department
managers.

FY2016

Goal 1: Increase the average length of service for women by 20% or more from now.

Major Action Policy for FY2019

Reference
Whistleblowing System

Improving the Value of Human Resources and Creating a Comfortable Working Environment●● Respect for Human Rights
We declare our respect for human rights in the Sanki Engineering Group Codeof Conduct and Action Guidelines, which prohibits discrimination based onnationality, gender, age, and disability. Moreover, we endeavor to instill respectfor human rights across the Company through various means, including
educational programs. We have set up guidelines for preventing harassment,a system offering consultation on harassment, and other workplace issues.
Also, we have a counter staffed by qualified external counselors. In June 2017,
we added the Women’s Hotline, through which callers can consult with female
advisors. We also seek to incorporate results of our compliance awarenesssurvey when monitoring human rights issues.

ESG Initiatives Social

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

Our Commitment to Employees

60

Governance

Promoting Diversity

Improving the Value of
Human Resources andCreating a Comfortable
Working Environment

Important Issues

SocialGoal 3:	Raise the ratio of women in managerial positions to the construction industry averageof 1%.

Held a roundtable discussion
for working mothers.

FY2017

Opened the Women’s Hotline,
which accepts consultations.
Held a roundtable meeting forfemale engineers.

FY2019Due to the abolishment ofregional positions, the numberof employees switching
to career-track positions
increased.

SANKI REPORT 201961

ESG Initiatives
Environment●● Education and Training Systems
We maintain training systems associated with each career path, such as
management training, technical training, and training by field of expertise inorder to strengthen specialized skills, technical skills, and management skills
and boost personal growth. We also operate an overseas language program
designed to develop human resources adaptable to diverse environments. In
technical training, we use the Sanki Techno Center to provide practical training
as well as classroom lectures.
Group work in a classroom learning
program■■Training Systems
Younger Employees

Mid-career Employees

Seeking to provide employment opportunities for older employees withadvanced skills and expertise, we led the industry by introducing a system
for the reemployment of employees following retirement. In fiscal 2018, wereemployed 232 retired employees on a consolidated basis, compared with
222 in fiscal 2017.

Developing and Evaluating Human Resources●● Personnel and Treatment System for Supporting Workplaces Where

People Grow
Our personnel system ensures equal opportunity and fair evaluation andtreatment for all employees while also supporting employee initiatives forcareer development.
In our personnel system, we introduced an early career system for
employees in their 20s to provide them with experiences in different jobs
early on in their career development. Once a year, all employees fill in a Career
Development Sheet and receive feedback through an interview with theirsupervisors. Another system allows employees to bypass their superiors andspeak directly with the Human Resources Department. These measures areoffered separately from the evaluation system.
As for treatment, we revised the salary system in April 2018 with the aimof securing talented young human resources and improving the treatment of
employees. We raised base pay and also provided executives with allowances.
Going forward, we will continue to strengthen employee education andworking conditions at Group companies as well.

Qualification training
Career-positioned staff training
Corporate ethics training

Corporate Ethics Training

Corporate ethics training

New employee training

Qualification training
Career-positioned staff training

Facilities Construction
Equipment Division

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

Plant & Machinery
Systems Divisions

New recruit orientation
Inspector education
Training on our products and systems

Quality & Environment
System training

ISO 9001/ISO 14001
New recruit orientation
Career-positioned staff training

Education to develop internal auditors

Promoting Work Style Reform●● Promoting Work-Life Balance
We have been augmenting our programs in response to employee requests
for broad support of a healthy balance of work and personal life so both maleand female employees can continue to work with a sense of security while
attending to various life events. In fiscal 2018, we introduced a trial of atelecommuting and telework system and implemented eight cases to create aworking environment that is beneficial for employees raising children or caring
for the elderly. The system’s full implementation will begin in fiscal 2019,
after which it will be evaluated based on feedback from participants and theirsupervisors.
■■Number of Employees on Childcare Leave, Nursing Care Leave, or Paid Leave

FY2014
Male
Childcare leave
Reinstatement
after childcare
leave (%)

Paid leave ratio(%)

SANKI REPORT 2019

Section chief training

New recruit training

Safety Training

Nursing care
leave

62

Management training

Fifth-year training

Improving the Value of Human Resources and Creating a Comfortable Working Environment●● System for Reemploying Workers Following Retirement

Department manager training

Seventh-year training

Technical training

We continue to hire persons with disabilities and are working to create anenvironment in which they can work comfortably over long periods. We holdproblem-solving seminars, opinion exchange sessions, and management
training for employees who are hearing-impaired to promote workplace
management so that all employees can thrive Also, we held a seminar on
business documents in February 2019.
In an effort to establish a safe working environment, all offices have been
installed with lamps that bear evacuation instructions for hearing-impaired
employees in the event of a disaster.

Third-year training

Management Training

Executives

Leadership position training

New recruit training●● Creating Workplaces for Persons with Disabilities

Governance

ESG Initiatives Social●● Career Change System
Sanki Engineering introduced a system that allows employees to change theircareer type from regional positions to career-track positions and vice versa.
In 2019, after reviewing career types, we abolished regional positions andomitted “transfer” from the career-track position’s criteria. Then the system
is applied for the change between career-track and operational positions. As
of April 1, 2019, 59 employees have changed their career type to realize work
styles tailored to the particular life stage of each employee. In addition, as aresult of reviewing career types, those of 18 female employees were switchedto career-track positions, leading to the promotion of active participation byfemale staff.

SocialFemaleFY2015
Total

Male

FemaleFY2016
Total

Male

FemaleFY2017
Total

Male

FemaleFY2018
Total

Male

FemaleTotal

Consolidated

–

–

–

2

8

10

1

15

16

2

18

20

7

11

Non-consolidated

0

9

9

1

6

7

1

12

13

2

14

16

7

9

18
16

–

100.0

100.0

100.0

100.0

88.9

93.8

Consolidated––

Non-consolidated

–

–

–

100.0

100.0

100.0

100.0

88.9

93.8

Consolidated

–

–

0

0

0

0

0

0

1

0

1

Non-consolidated

–

–

0

0

0

0

0

0

0

0

0

Consolidated

–

–

–

54.0

76.1

57.1

53.7

53.0

74.2

55.9

Non-consolidated

32.6

56.4

35.6

38.8

62.1

41.8

–
47.6

69.5

50.5

49.9

78.2

SANKI REPORT 2019

63

ESG Initiatives
Environment■■Major Programs Supporting Work-Life Balance (Non-consolidated) (as of April 2019)

Area

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 off

Paid leave for half a day at a time (no upper limit).

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 payday and avoid overtime.

Reserved leave

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

Telecommuting and telework system

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

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 Childcare leaveandNursing leavenursing
care
Shortened work hours
Support for childcare leave and reinstatement

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

In 2015 we were granted an update for the Kurumin mark, a certificate grantedby the Tokyo Labor Bureau of the Ministry of Health, Labour and Welfare andbased on the Act on Advancement of Measures to Support Raising NextGeneration Children, for meeting certain criteria as a company supportingchildcare. In 2014 the Chubu Branch became the first construction equipment
company to be recognized by the City of Nagoya as a company supportingchildcare, and certification was updated in 2017.
●● Maintaining and Improving Employee Health
We introduced a 24-hour toll-free health consultation service to offer advice
on health, medical, nursing, and childcare issues for employees and theirfamilies. The service was set up outside the Company, and the caller’s privacy
is strictly protected. We have also been working to prevent employees fromdeveloping mental health issues by conducting checkups for stress-related
symptoms, even before they became legally mandated in 2014. In February

The 3rd Sanki Ladies’ Roundtable with thepresident taking part in the discussion●● Sound Employer-Employee Relationships

The Human Resources Department and the employees union at SankiEngineering meet monthly to discuss improvements in the workplaceenvironment and the development and operation of Company systems. Also,
we provide the employees union with opportunities to present their proposals
or requests to management.
■■Employee Data (as of March 31 of Each Fiscal Year)

Certified as 3 stars in the 2nd NIKKEISmart Work Management Survey

5.1
100

Average number of paid leave days taken in FY2018

increasedby%from thepreviousyear

FY2018 paid summer vacation acquisition rate%achieved

–

Male
2,022
(637)
1,677
(550)
–

FY2015
Female
287
(5)
249
(3)
–

Total
2,309
(642)
1,926
(553)
–

Male
2,041
(653)
1,678
(572)
–

FY2016
Female
298
(5)
255
(3)
–

Total
2,339
(658)
1,933
(575)
–

Male
2,079
(664)
1,698
(586)
–

FY2017
Female
305
(5)
271
(5)
–

Total
2,384
(669)
1,969
(591)
–

42.6

43.7

36.1

42.7

43.8

36.5

42.8

43.8

36.3

42.8

43.9

37.1

43.0

–

–

–

–

–

–

–

–

–

–

17.3

13.0

16.7

18.2

18.8

12.9

18.1

19.0

13.3

18.2

18.8

13.2

18.0

19.0

13.9

18.3

–

111

20

131

81

20

101

105

21

126

106

17

123

95

75

18

93

60

16

76

88

21

109

75

11

86

–

234

2

236

235

5

240

217

5

222

223

9

232

203

188

2

190

183

4

187

164

3

167

161

5

166

–

–

–

–

–

–

–

–

–

–

–

–

44

37

–

–

32

–

–

30

–

–

32

–

–

36

FY2014

Number of employees

Consolidated

2,282

Nonconsolidated

1,908

Consolidated
Nonconsolidated
Consolidated
Average years of service
Nonconsolidated
Consolidated
Number of new recruits
Nonconsolidated
Consolidated
Number of rehired post
Nonretirement-age employees
consolidated
Consolidated
Number of
NonEmployment people withdisabilities
consolidatedof people
with
Consolidated
Ratio of people
disabilities
with disabilities Nonconsolidated
Average age
Average years of service●● Acquiring the Kurumin Mark and Recognition for Supporting Childcare by the City of Nagoya

SANKI REPORT 2019●● Mechanism for Gathering Employee Feedback
Since fiscal 2016, we have continuously held the Century Communication
Up (CCU) discussion events in accordance with the Century 2025 long-term
vision. In fiscal 2018, we held 15 CCU dialogues with the president, withroughly 100 employees engaging in discussions. We also held the 3rd Sanki
Ladies’ Roundtable to support the creation of a network through which female
employees can consult with each other. We have applied their opinions andproposals to improve our operations and systems.

Improving the Value of Human Resources and Creating a Comfortable Working Environment●● Promoting the Smile Project
Sanki Engineering launched the Company-wide Smile Project, led by thepresident, in fiscal 2015 to promote work style reform. We have been
implementing initiatives across the Company to create a better working
environment, such as by revising internal paid leave programs and introducing
the use of tablets at construction sites. In fiscal 2017, we set up the Smile
Site Plan, a committee dedicated to construction sites. We are working on
efforts to lessen the operational load of construction managers and enhancecapabilities and quality at our construction sites.
In fiscal 2018, we removed restrictions on the half-day off program, and as
a result the average number of days taken in fiscal 2018 increased by 5.1%
year on year. In addition, we reviewed our summer vacation program andallowed for the extension and split of the period, achieving a summer vacationacquisition rate of 100%.
As a result of these efforts, we were certified as 3 stars in the 2nd NIKKEISmart Work Management Survey, which selects advanced companies thatchallenge the productivity revolution through work style reform. Looking
ahead, we will continue to promote our work style reform under the employeefirst principle.

64

2019, we invited health management guidance specialists at our head office tohold health promotion events over a three-day period to raise awareness about
health maintenance.

Can be obtained for the requested amount of time up to when the child turns one year old.
Can be obtained five times for up to 180 days per person on nursing leave.

Governance

ESG Initiatives Social

Work

ProgramSocial

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

FY2018
Female
322
(5)
273
(3)
38.2

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

–

–

–

–

–

–

–

–

–

–

–

–

1.89

2.11

–

–

1.80

–

–

1.69

–

–

1.78

–

–

1.93

Figures in parentheses indicate the number of managers.
■■Employees by Age (as of March 31, 2019)10s
The Kuruminmark for supportof raising nextgeneration
children

Health promotion event

City of Nagoya
certification forcompanies supportingchildcare

Consolidated
Non-consolidated

VO

I

CE

3 (1)
3 (1)

20s
414 (83)382 (81)30s
528 (97)443 (80)40s
677 (97)527 (80)50s
519 (35)425 (26)60s
249 (9)183 (5)

70s
4 (0)
4 (0)

Total
2,394 (322)
1,967 (273)

Figures in parentheses indicate the number of managers.

Labor-management reform that leads to customer trust

At the Employees’ Union, we draws out the voices of our members in regard to maintenance and improvement of working
conditions and welfare benefits. And we express positive opinions to management, communicating openly with them, towardrealizing specific measures. One proposal, entitled “Promotion of taking paid leave,” was made by us for the work style reform infiscal 2016.
The new medium-term management plan has set the targets for sales to be constant and the profit margin to be improved.
We viewed these as management’s consideration, not only for sales but also for long working hours. A comfortable working
environment helps to motivate employees and improve productivity, resulting in increased quality of human resources andwork that in turn leads to customer trust. To establish a better working environment, we will continue to maintain healthy labormanagement relations while proposing pragmatic measures for both our members and the Company.

Tomoyuki Kimura
Central Chairperson, SankiEngineering Employees’ Union

SANKI REPORT 2019

65

ESG Initiatives
Environment

SocialSocialGovernanceSanki Forest

Coexistencewith Local
Communities

ESG Initiatives Social

To commemorate the 90th anniversary of our founding, we held a weeding eventat the Sanki Forest in Kai City, Yamanashi Prefecture, in September 2018, where
we had planted a thousand trees in October 2015. With the help of staff from thelocal forestry cooperative, 32 of our employees used sickles to clear underbrushas volunteers.
Weeding event participants

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

Our Approach to Local Communities

Important Issues◦ Coordination with local communities◦ Contribution to society as a corporate citizen

FY2018

Regional disasterprevention

Conservation of the local Supporting the development
environmentof the next generation[ Primary Goals ]Participated in regional disasterprevention activities

Participate in environmental
beautification activities

Provide educational opportunities
such as environmental seminars

37

Offered 8 social study tours

Held Group-wide activities

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

locations

Assessment

169

students

Assessment

Major Action Policy for FY2019
Participate in regional disasterprevention activities

66

SANKI REPORT 2019

Participate in environmental
beautification activities

Provide educational opportunities
such as environmental seminars

Coexistence with Local Communities

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

Activities
Under an agreement concluded with Yamato City in fiscal 2013, our businesssite in the city will be made available as a temporary shelter for those unable toreturn home in the wake of a disaster. The former Yamato Engineering Center
was relocated and opened as the Sanki Techno Center in October 2018. Even
after the relocation, the agreement still remains in effect. The center has
broadened its function to serve regional disaster prevention by adding a newspace for those who could be stranded and unable to return home in the eventof a disaster.
Furthermore, Sanki Engineering has concluded an agreement with Yamato
City on the emergency recovery of water supply and sewage facilities. Under
the agreement, we will work to restore the functions of the city’s water quality
management centers promptly in the event they are damaged by a disaster.

Space in the Sanki Techno Center for
people stranded after a disaster●●  Immediate Dispatch Drill for Earthquakes
Under the Agreement on Emergency Cooperation in the Wake of Earthquake
for Public Buildings in Yokohama City, signed by Yokohama City and the
Kanagawa Air Conditioning Sanitation Industry Association, our Yokohama
branch employees took part in an immediate dispatch drill for earthquakesthat was organized by the Yokohama City Architecture Bureau in September
2018. The drill involved an initial response to a disaster, safety inspection, firstaid, and communication at public facilities, which play central roles in disasterrecovery.

Cleanup and Environmental Beautification Activities
Each branch, branch office, and Group company participates in cleanup
activities in areas around their offices or construction sites as well as
environmental beautification activities organized by local governments. In fiscal
2018, employees of the Okubo Office of Group company Sanki Kankyo Service
Co., Ltd. participated in the Zero Trash Campaign in Saitama Prefecture, which
involved cleaning the streets near the water treatment facility constructedby the company and other areas. The campaign contributed to maintaining
the environment as well as addressing the problem of plastic waste flowing
from rivers into the sea. In addition, employees at the Omura Office of Sanki
Kako Kensetsu Co., Ltd. joined a coastal cleanup in Omura City, Nagasaki
Prefecture. On a Group-wide basis, we carried out activities in more than 30
local communities.

Coastal cleanup by employees of Sanki
Kako Kensetsu Co., Ltd.

SANKI REPORT 201967

ESG Initiatives
Environment

SocialGovernanceSupporting the Development of the Next Generation
The Sanki Environmental Garden opened in 2005 and was a popular place for
locals to relax until the former Yamato Engineering Center was relocated. The
garden was moved to the Sanki Techno Center, where it remains open to the
local community. Many children from neighboring day-care centers visit andenjoy using this facility for the next generation.

Corporate GovernanceChildren playing at Sanki Environmental
GardenSocial Studies Tour at Tanekawa
Elementary School

Main Points Added to the Revised
Guidelines

Corporate Governance Guidelines
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 thestatus of our compliance with the Corporate Governance Code.
Following the revision of the code in June 2018, we revised theguidelines in December of that year. We will continuously seek toenhance our corporate governance under the guidelines in order toachieve sustainable growth for the Group and strengthen its corporate
value over the medium to long term.

•	Functioning as a corporate pension
asset owner•	Proposal for dismissal of directors•	Composition of the Advisory
Committee on Nomination andRemuneration and nomination ofmembers•	Scope of stock options in officer
remuneration

Corporate Governance●● Sanki Kankyo Service Welcomes Social Studies Tours by Local Schools
Our Group company Sanki Kankyo Service Co., Ltd. hosts field trips forelementary schoolchildren at its offices and water purification plant. In August
2018, Sea Clean Suttsu and the Suttsu Water Purification Center in Hokkaido
received 17 students from Suttsu Elementary School, and in September
2018, Sea Clean Suttsu welcomed 6 children from Oshoro Elementary
School. In September, the Yoichicho Office in Hokkaido received 62 students
from Kurokawa Elementary School, in October the Ryotsu Office in Niigata
Prefecture welcomed 15 from Kawasaki Elementary School, and in February
2019 the Imakane Office in Hokkaido received 6 from Tanekawa Elementary
School. The students learned about the role and workings of the seweragesystem. We also organize facility tours for people living in the neighborhood.

Governance

ESG Initiatives Governance●● Public Opening of the Sanki Environmental Garden

GovernanceSocialWEB Sanki Engineering Corporate Governance Guidelines

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

Support for Sports Promotion and Revitalization
We served as an official supporter of the Japanese national team for World
Deaf Rugby 7, an international championship for deaf rugby sevens, held in
Sydney, Australia in April 2018. Managed by Takayuki Ochiai, who works at our
Kansai branch, the Japanese national team finished in fourth place.
In February 2018, we became an official sponsor of Yamato Sylphid,a women’s soccer team in Yamato City, Kanagawa Prefecture, where the
Sanki Techno Center is located. We will continue to contribute to society bysupporting sports while at the same time creating a working environment thatencourages employees to engage with the local community.

Corporate Governance System

World Deaf Rugby 7

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

Yamato Sylphid women’s soccer team●● Corporate Governance System
We adopted a Company with Board of Company Auditors system withdedicated, full-time auditors as our form of corporate governance. Under thisstructure, the auditors and the Board of Auditors exercise oversight over the
execution of duties by directors, the accounting auditors auditing the financial
statements and other documents as well as the Board of Directors responsible
for making decisions on material issues. In addition, to increase management
efficiency and simultaneously speed up the decision-making process,we employ an executive officer system in which we divide management
functions between the Board of Directors, responsible for decision-making andsupervision functions, and executive officers, responsible for the execution ofbusiness affairs.
■■Summary of the Corporate Governance System (as of June 27, 2019)

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

68

SANKI REPORT 2019■■Frequency of Major Meetings (FY2018)

Meeting

Director and Chairman
12 (0)3 (3)38 (0)

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

Average Attendanceof External Officers

Frequency

Board of Directors

13

94%

Board of Auditors

9

92%

Management Meeting37– (attended by onlyinternal officers)

7
5 (0)
3 (3)

SANKI REPORT 2019

69

ESG Initiatives
Environment

SocialGovernance

Framework of the Corporate Governance System (as of June 27, 2019)

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

General Shareholders’ Meeting
Appointment/Dismissal

Board of Company Auditors
5 auditors *2 including 3 external auditors
One substitute auditor

Appointment/Dismissal

Business auditing
Accounting auditing

Board of Directors

Accounting Auditors

12 directors*1 including 3 external directors(Ernst & Young ShinNihon LLC)

Consultation

Liaison Meeting of External Officers
Appointment to/removalfrom office

Risk Management Committee
Executive Officer Committee

Discussion
and reporting

ReportReport*3

Principle 1.4—

Article 10●

Principle 1.7

Procedures for related party transactions—

Article 9.3
Article 18.4●

Business principles and business plans

●

—

—

Basic views and guidelines on corporate
governance—

Article 2●

Policies and procedures for determining the
remuneration of directors and auditors—

Article 31●

Policies and procedures for nominating
directors and auditors—

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

Reasons for nominating directors andauditors—

Article 23●

Supplementary
Principle 4.1.1

Matters to be resolved by the Board of
Directors and scope of matters delegated to
management—

Article 18●

Principle 4.9

Independence standards for external officers—(Appendix)
Independence
standards forexternal officers●

Supplementary
Principle 4.11.2

Concurrent positions of external officers—

Article 26●

Supplementary
Principle 4.11.3

Evaluating the effectiveness of the Board of
Directors—

Article 29●

Supplementary
Principle 4.14.2

Training policy for directors and auditors—

Article 30●

Policy on system development and efforts topromote constructive dialogue with shareholders—

Article 32●

Reporting

Leadership andsupervisionPrinciple 3.1
Full Disclosure

President and Representative Director

Management Meeting
Corporate Ethics Committee

Discussion, andreporting onimportant matters

Internal Finance Control
Committee

ReportingExecutive Officers

Policy Meeting

Leadership and supervision

Monitoring, guidance, support and education

Internal Audit Department
Auditing

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

Board of Directors
The Board of Directors holds a meeting, led by the chairman, atleast once a month to decide on important matters and supervise
the status of execution of business affairs.

Internal Finance Control Committee
This committee consists of directors and executive officers, ischaired by the president, and meets four times a year. Its central
role is Group-wide control, including review and decision-making
concerning important matters regarding internal controls forfinancial reporting.

Management Meeting
The meeting consists of directors and executive officers nominatedby the president and, in principle, meets twice a month. As adecision-making body for fundamental and key matters related
to the execution of business affairs, the meeting deliberates andmakes decisions from the standpoint of overall management.

Advisory Committee on Nomination and Remuneration
This committee consists mainly of the president and external
directors. The chairperson and the majority of committee
members are external directors. It deliberates on matters
including the nomination of candidates for directors and thesystem for and level of remuneration, and it meets as needed.

Policy Meeting
Risk Management Committee → See page 79.

● Auditing System● Business Execution System

Executive Officer Committee
Consisting of executive officers and presidents of the Group
companies, the committee meets at least four times a year
to communicate the policies expressed by the president andexecutive officers responsible for departments, report on thestatus of business execution by each executive officer and Group
company president, and discuss initiatives for achieving the
medium-term management plan.
Corporate Ethics Committee
The meeting consists of executive officers and is chaired by thepresident. The executive officers responsible for corporate ethics
and nominated by the president oversee all matters related tocorporate ethics. The committee meets twice a year to deliberate
on plans for the implementation and observance of the Code of
Conduct and Action Guidelines.

70

SANKI REPORT 2019

Board of Company Auditors
The board consists of auditors, 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, the Internal Audit Department, and theinternal controls departments. A supplementary external auditor
has been appointed to fill any future external auditor vacancies.
Internal Audit Department
This department conducts internal audits of the execution ofoperations by business divisions in accordance with the Auditing
Plan for that fiscal year. It verifies the internal management system
including its appropriateness and efficiency. As necessary, thedepartment exchanges opinions with or makes proposals concerning
the improvement or correction of a problem to the internal controls
departments and reports the results of its audits to the president andauditors.

Principle 5.1*1	Company’s website*2	Company’s Corporate Governance
Guidelines*3	Company’s Corporate Governance
ReportCorporate Governance

Guideline*2

Basic policy on cross-shareholdings andvoting rights

Advisory Committee on
Nomination and Remuneration

Election, dismissaland supervision

Disclosed Location
Website*1

Accounting auditing

Exchange of opinions,establishing common awareness3 external directors
3 external auditors

Principle

Appointment/Dismissal

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

Efforts Implemented in Fiscal 2018
Response to the Revised Corporate Governance CodeIn response to the revision of the Corporate Governance Code in June 2018, the SankiEngineering Corporate Governance Guidelines were also updated, and the reasons for not
implementing each principle regarding four items were newly disclosed.
Change in Articles of Incorporation
The maximum number of directors was changed from 12 to 16, given that establishing a moresophisticated governance system requires the Board of Directors to include members withdiverse knowledge, experience, and capabilities and to work on improving corporate value overthe medium to long term by balancing execution and supervision.
Reviewing Discussion Standards for Board of Directors’ Meetings and Management
Meetings
The discussion standards for the Board of Directors’ meetings and management meetings werereviewed to improve the effectiveness of the governance system.

SANKI REPORT 201971

ESG Initiatives
Environment

SocialGovernance■■Elements and Procedures for Remuneration for Directors and Auditors (as of June 27, 2019)

Efforts Implemented to Date

Stock Options◯◯◯
Executive officers only

External
director◯◯－

meetings on the same day, as we had in the past. Since fiscal 2018, we began holding these

Full-time auditor

meetings, in principle, on different days with the exception of the day of our financial results

◯

◯

－

External auditor

◯

◯

－

Board of Directors, we are no longer holding Management Meetings and Board of Directors’

To secure adequate time to discuss the risks inherent in the agendas submitted to theannouncement, thereby raising the effectiveness of the Board of Directors.

Procedure

Category

A liaison meeting, comprising mainly external directors and auditors, is held once every

Determined through consultation amongauditors

Persons Receiving
Payment

quarter to openly exchange views, thereby sharing necessary information and developing a

Directors (external directors)

13 (4)

common awareness of such information.

Auditors (external auditors)

6 (3)Training for Officers
including our history, achievements, and future business plans as well as legal, financial, andaccounting information. During their terms in office, we continue to offer regular opportunities
for obtaining knowledge related to the supervision and auditing of management.

Fiscal 2018 Efforts to Assess the Effectiveness of the Board of Directors
Self-assessment questions were thoroughly reviewed based on third-party advice. The
completeness of evaluation items was enhanced by composing them in four areas: roles andresponsibilities of the Board of Directors, composition of the Board of Directors, roles andqualities of directors, and management of the Board of Directors.

SANKI REPORT 2019

603,810 (32,400)
104,700 (29,700)

WEB
Independence Standards for External
Officers (Appendix for the SankiEngineering Corporate Governance
Guidelines)
https://www.sanki.co.jp/en/
corporate/governance/guideline.
html

Composition of Officer Remuneration•	Fixed remuneration:
rank and scope of
responsibilities•	Bonus: portion linked toperformance during theperiod•	Stock options: granted
according to rank as along-term incentive●● Internal Controls• 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 tothe execution of operations. Furthermore, it exercises oversight to ensure that
operations are being effectively executed. The Management Meeting is held every
week to ensure the effective execution of duties in accordance with the rules fordiscussion and reporting. Moreover, to strengthen management oversight, theLiaison 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
if needed, and discuss matters as required. In addition, the full-time auditor seeks
to ascertain the status of internal controls across the Group by regularly exchanging
opinions with the internal audit department and Group company presidents andauditors, receiving reports from the accounting auditors, and exchanging opinions.
In fiscal 2018, we changed our audit system so the full-time auditor of theCompany could concurrently serve as an auditor of a Group company in order tostrengthen the Group’s risk management system.

Corporate Governance●● Assessing the Effectiveness of the Board of Directors
The directors conduct an annual self-assessment to verify their deliberation
process and identify possible improvements as well as to analyze and evaluate
the effectiveness of the process toward improving the board’s effectivenessand disclosing a summary of the results.

●● Officer Remuneration
Sanki Engineering has established the Advisory Committee on Nomination andRemuneration under the Board of Directors, comprising the president, external
directors, and others to nominate candidates for directors and to deliberate
on matters including the system and level of remuneration. The majority ofcommittee members, as well as the chairperson, are external directors.
The remuneration for directors comprises, within the limits adopted
by our general shareholders’ meeting, of fixed remuneration, bonus, andstock options. Each fiscal year, we decide amounts, with due consideration
for balancing each of the following elements, in order to raise the level ofmotivation for maximizing corporate value in tandem with the long-term
interests of shareholders.

Total Payment**Unit: thousands of yen

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

The Advisory Committee on Nomination and Remuneration considers
candidates for directors and submits the results to the Board of Directors
for deliberation. Appointments are finalized by a resolution at the generalshareholders’ meeting. We have established standards on the independenceof external officers to raise the objectivity of their oversight of management.

Determined by the Board of Directors
following deliberation by the Advisory
Committee on Nomination andRemuneration■■Remuneration for Directors and Auditors in Fiscal 2018

Liaison Meeting of External Officers●● Appointment of Directors and Independence of External Officers

ESG Initiatives Governance

Bonus

Full-time
director

Separately Scheduling Management Meetings and Board of Directors’ Meetings

72

Fixed
Remuneration

Category• Ensuring the Reliability of Financial Reporting
The Internal Finance Control Committee meets four times a year to conduct our
financial reporting in accordance with the internal control framework stipulated
based on the Financial Instruments Exchange Act of Japan. Moreover, we
promote the establishment and appropriate management of an internal control
system to safeguard the reliability of our financial reporting by having thecommittee deliberate on the assessment and response with respect to thefinancial risks within each department and Group company.
A report is produced in adherence with the internal control reporting system toensure that internal controls related to financial reporting are being exercised
effectively. In the report for fiscal 2018, accounting auditors expressed theiropinion that our financial reports were presented in an appropriate manner interms of all material aspects.

SANKI REPORT 201973

SocialGovernance

ESG Initiatives Governance

Governance

Executives of the Sanki Engineering Group (as of June 27, 2019)

Thorough ComplianceDirector and Chairman

Representative
Director and President

Takuichi Kajiura

Tsutomu Hasegawa

Representative
Director

Nobuo Kumura

Representative
Director

Hidemi Fujii

Director

Eiji Mitsuishi

Director

Takashi Motomatsu
Basic Philosophy
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.

Director

Hirokazu Ishida

Masayuki Kudo

Director

Masato Komura

External Director

Yukiteru Yamamoto

External Director

Makoto Nukaga

External Director

Kazuhiko Kashikura

WEB

Sanki Engineering Group Compliance Declaration, Sanki Engineering Group Conduct Standards
https://www.sanki.co.jp/en/csr/policy/compliance.html#etc02

WEB

Sanki Engineering Group Code of Conduct and Action Guidelines

Thorough ComplianceDirector

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

Compliance Promotion System

Full-time Auditor

Full-time Auditor

Etsuji Hitomi

Hirotoshi Fukui

External Auditor

Shozo Fujita

External Auditor

Yutaka Atomi

External Auditor

Toshiaki Egashira

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

Compliance Promotion Activities
Director

Chairman

Chair of the Board of Directors

Representative Director President

Director

Takuichi Kajiura
Tsutomu Hasegawa

Vice President and Executive Officer Chief Financial Officer

Nobuo Kumura

Vice President and Executive Officer

Hidemi Fujii

Senior Executive Officer
Senior Executive Officer
Senior Executive Officer
Managing Executive Officer

General Manager, Mechanical & Electrical Contracting
Headquarters
General Manager, Plants & Machinery Systems
Headquarters
General Manager, Management Planning Office

Eiji Mitsuishi
Takashi Motomatsu
Hirokazu Ishida
Masayuki Kudo
Masato Komura

External Director

Yukiteru Yamamoto (Independent Officer)
Makoto Nukaga (Independent Officer)
Kazuhiko Kashikura (Independent Officer)

Full-time Auditor

Hirotoshi Fukui
Etsuji Hitomi

External Auditor

Shozo Fujita (Independent Officer)
Yutaka Atomi (Independent Officer)
Toshiaki Egashira (Independent Officer)

74

SANKI REPORT 2019●● Whistleblowing System
We set up the Corporate Ethics Hotline for reporting on compliance-related
issues and a Fair Trade Hotline for reporting on violations of the Anti-Monopoly
Act, both within and outside the Company. The internal hotline goes to thefull-time auditor and CSR Promotion Division, while the external hotline goesto our consulting attorney’s office. We act swiftly to resolve the issues thatare reported, with due consideration for the protection of anyone seeking
consultation or providing information in accordance with the Corporate Ethics
Regulations. All of the reported information is presented to the executives
responsible for corporate ethics, and important information is reported to
the Board of Directors. In fiscal 2018, there were 21 reported incidents (20internally and 1 externally), and all incidents have been 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.
We are also distributing a corporate ethics hotline card to raise awarenessof the system throughout the entire Group. The hotline is also available to

SANKI REPORT 201975

ESG Initiatives
Environment

Board of Directors (president)
ReportOfficers responsible forcorporate ethics
ReportExcerpted Results of a Questionnaire Regarding Compliance Awareness for 2019*1

Secretariat (CSR Promotion Division)

ReportESG Initiatives Governance■■Whistleblowing System

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

business partners, and the Company provides contact information.
In addition, we began operating the Fair Trade Hotline in fiscal 2016 forreporting of violations of the Anti-Monopoly Act. No violations were reported infiscal 2018.Since fiscal 2018, a summary of reports has been disclosed within
the Group.

Full-time auditor

Social*1	These were the top three answers.

Survey period: May to June 2019 Participants: all Group executive officers and employees

Q Do you know the content of the Sanki Engineering Group Code of
Conduct and Action Guidelines and understand them?

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

Fair Trade Hotline

Women´s Hotline

Report and Consultation

Sanki Engineering (target employees)
Compliance confirmation sheets concerning
performance of duties*1

40Compliance confirmation sheets*2

Subsidiaries (target employees)

(40)

37

(37)

2,027 (2,044)

412

(417)

43%

I generally understand.

44%

I do not fully understand.

13%

Q Do you know that exchanging information and making adjustmentswith industry peers regarding the selection of prospective contractors
and bid prices are violations of the Antimonopoly Act?

●● Compliance Confirmation Sheets from All Executives and Employees
In order to refresh the awareness of all Group executives and employees of
the responsibilities they must fulfill in their respective positions and roles,
compliance confirmation sheets covering items such as observance of theCode of Conduct and Action Guidelines, and eliminating anti-social forces, aresubmitted at the beginning of each fiscal year. In fiscal 2018, there were noserious compliance violations.
■■Number of Persons Submitting Compliance Confirmation Sheets (Fiscal 2019)

I fully understand.

Thorough ComplianceCorporate Ethics Hotline

Harassment Consulting Office(external expert counsellor)

Yes

97%

No

3%*2

Q Please answer all of the following that apply to your current working
environment. (Multiple answers are allowed.)*1	Compliance confirmation sheets
concerning performance of duties are
submitted by directors and executive
officers.
*2	Individuals who have not submitted
compliance confirmation sheets areon maternity leave, receiving medical
treatment, etc.

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

I think that personal relationships in the workplace are relatively good.

71%

It seems easy to consult with senior staff

55%

It seems easy to take various kinds of vacations

52%*2	We seek to develop a deeper
understanding of the Anti-Monopoly Act
by introducing examples of violations
during Corporate Ethics Training heldeach year.

●● Compliance Audit
The Internal Audit Department conducts compliance audits and seeks tostrengthen compliance by providing guidance on legal compliance and throughmonitoring. In fiscal 2018, internal audits were carried out at 20 worksites
including those of 3 domestic subsidiaries and 1 overseas subsidiary. In
addition, to raise awareness at our construction sites, we conduct onsite
hearings with site managers to gain a better understanding of the situation.

■■Results of Corporate Ethics Training (Fiscal 2018)

Frequency and participation(attendance rate)

Theme

TargetSanki Engineering Group Code of Conduct andAction Guidelines, and compliance with theAnti-Monopoly Act

All Group executive
officers and employees

37 sessions
2,414 employees(98%)*Those who not completed the training
were followed up■■Results of Training for Newly Assigned Sales Staffs (Fiscal 2018)

Theme
Compliance with the Anti-Monopoly Act

76

SANKI REPORT 2019

TargetNewly assigned sales staff

Participation (attendance rate)
18 (100%)

SANKI REPORT 201977

SocialStrengthening Anti-Monopoly Act Compliance
The following are key measures we undertook between fiscal 2013 and fiscal
2018. In fiscal 2018, we revised the Anti-Monopoly Act Compliance Manual.
Using the results of the compliance awareness survey, we will continue ourGroup-wide effort to prevent violations of the Anti- Monopoly Act in fiscal 2019.

Governance

ESG Initiatives Governance●● Measures in an Ongoing Effort to Prevent Recurrence

GovernanceRisk Management

Policies and Manuals• Formulated the Sanki Engineering Group Compliance Declaration and Sanki EngineeringGroup Conduct Standards.

Basic Philosophy• Distributed the Compliance Handbook.
• Issued and revised an Anti-Monopoly Act Compliance Manual.
• Clearly stipulated breaches of laws such as the Anti-Monopoly Act as grounds fordisciplinary action.
Structural Reinforcements• Resolved to establish a comprehensive, Group-wide Anti-Monopoly Act Compliance

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

for deciding the bid amount for public works and operating a compulsory system ofadvance approval and reporting when attending a meeting with any companies in thesame 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 andsought widespread understanding among employees.
Training and Education• Submitted compliance confirmation sheets.
• Boosted awareness of compliance-related hotlines.
• Top management visited all business bases to hold corporate ethics training sessions
through direct exchange with all Group executives and employees.
• Held training on the Anti-Monopoly Act for newly assigned sales staff.

Risk Management

Program at a meeting of the Board of Directors and implemented the program.
• Assigned a compliance manager in each department and began supervising the process

Risk Management Promotion System
We set up the Risk Management Committee, chaired by a risk management
officer, to centrally manage Group-wide risks and implement an organizedresponse. In principle, the committee convenes once every quarter to monitor
important risks throughout the Group, formulate a control plan, and monitor
risks reported from subcommittees and divisions. To enhance the effectivenessof our risk assessment and control, we have set up the Risk Management
Subcommittee to address specific risks under the Risk Management
Committee. In fiscal 2019, we reorganized the subcommittee and launchedothers, including the Quality Subcommittee. Moreover, the Internal Audit
Department conducts regular audits to check the status of risk management at
each division and verify the appropriateness of risk management.
■■Framework of the Risk Management System (as of July 10, 2019)

President and Representative Director
ReportManagement Meeting

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

Discussion on policy torespond to important risks

ReportInternal Audit Department
Audit
ReportRisk Management Committee
Chairperson:
Members:
Roles:

MonitorConvenes:

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

Report findings of deliberations

MonitorReport status

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

Subcommittees

ReportCustomer (credit)

Overseas

Supplier (credit)

Compliance

Legal and labor

Quality

Financial

SafetyManagement(public relations)

Information security

78

SANKI REPORT 2019

MonitorMonitorCommittees and Management System
Central Disaster Countermeasures Committee
Corporate Ethics Committee
Internal Finance Control Committee
Management review of EMS and QMS
Central Safety and Health Committee

SANKI REPORT 201979

ESG Initiatives
Environment

Risk Management Activities•	Customer credit risk
•	Sudden fluctuations inmaterial and equipment
prices and labor costs•	Stock market fluctuations•	Increase in retirement benefit
expenses and debt
•	Country risk•	Accidents and disasters infacility construction, etc.
•	Unprofitable construction•	Risk in the real estatebusiness•	Risk related to lawsuits, etc.
•	Risk due to legal regulations,etc.
•	Risk related to disasters, etc.

·	Analyzed the portfolio based on performance at the end of March and September

Supplier credit·	Activated an alarm using bankruptcy predictions every month·	Monitored the security of electronic orders

Operational·	Considered a revised BCP proposal·	Developed and introduced new tools for concerns such as disaster information
sharing

Information security·	Changed the password policy·	Enhanced support for detecting suspicious activities on the corporate LAN

Overseas·	Formulated a specific action plan to respond to accidents

Compliance·	Formulated and implemented measures to prevent power harassment in eachdepartment

Initiatives to Ensure Information Security

Responding to Disaster Risks through the BCPThe Sanki Engineering Group’s business continuity plan (BCP) aims to ensure
the safety of all related persons, including employees, based on the integrated
efforts of all divisions and employees. The Company has also built a framework
to contribute to customers and society through swift business restoration incollaboration with business partners. We have sought to maintain our system
under normal conditions and clearly establish the codes of action and divisionof roles for times of disaster in order to ensure that restoration activities can be
implemented more promptly. To date, we have relocated the directors’ offices
from the upper floors to the lower floors to ensure the functionality of theemergency response headquarters, conducted a drill on the assumption thatthe head office sustained damage and another office served as an alternative
headquarters after a major disaster, and modified the way we operate oursafety confirmation system.
In fiscal 2018, we expanded the use of the recently introduced disaster
information sharing tool to all Group employees. In April 2019, we created anddistributed a handbook explaining our initial response in the event of a largescale disaster to promote employee understanding of how to respond at timesof disaster.

SANKI REPORT 2019

We have formulated the Risk Management Manual for Overseas Operations
for the head office and overseas bases as well as the Manual to Ensure Safety
in Foreign Countries for overseas employees, those traveling overseas on
business, and their families, which are revised each year.
The Risk Management Manual for Overseas Operations stipulates the rules
and response procedures for crises that could occur in foreign countries. It
covers various crisis situations such as preventing physical harm to overseas
employees and others, addressing the violation of laws, responding to themass media, and dealing with litigation. The Manual to Ensure Safety in
Foreign Countries was compiled as a practical guide and includes actual
situations and checklists that cover actions required in the event of a terrorist
attack or disaster, the prevention of damage from crime and other risk,
compliance with anti-corruption and other laws, personnel/labor managementof locally employed staff, religion, and other related matters to help overseas
employees and other people avoid risk and respond to emergencies.
In fiscal 2018, we worked to improve our Group management system,
including overseas sites, by reviewing the audit systems of Group companies
to enable our auditors to concurrently serve as auditors of Group companies.

Risk Management

Countermeasures

Customer credit

ESG Initiatives Governance

Risks Affecting Business■■Major Countermeasures in Fiscal 201880

Governance

Strengthening Risk Management in Overseas Operations

Each fiscal year, the Risk Management Committee identifies risks that affectbusiness activities and stipulates priority risk items for the fiscal year. The
committee receives reports from the risk management subcommittees tomonitor risks and consider necessary countermeasures, provides instructions,and confirms the status of progress.
In fiscal 2018, the committee convened four times to review some of themonitoring indicators and prepare for more quantitative risk management,
and also to review the system to ensure that risk management operations
are aligned with current conditions. In addition, the committee provided
information to the branch managers and executives at five branches that are
not members of the Risk Management Committee about the risk management
system and the latest topics and exchanged ideas with them. Through these
efforts, the committee deepened understanding of the importance of risk
management and management methods at each branch.

Risks

SocialInitial response
handbook for
employees in theevent of a disaster

The Group handles information provided by customers in accordance with
our Information Security Risk Management Rules. We have established
Information Security Risk Subcommittee within the Risk Management
Committee as a management system.
Through the system, we can control information security measures
Company-wide and manage risks related to information security in an
integrated manner. As part of our efforts to develop our management system,
we use checklists to confirm the status of information security measuresduring onsite inspections by supervisors at each branch and branch office.
To strengthen our countermeasures for information security risks, we
strengthened responses to suspicious activities on the corporate LAN,
continuously send alerts on information security, reviewed the password
policy, and carried out regular audits. In fiscal 2018, we held two subcommittee
meetings.
■■Key Information Security Measures

Type

BCP drill

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

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

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

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

Measures for social
media·	Instill an understanding among Group employees using guidelines·	Improving the level of security regarding social media

SANKI REPORT 201981

SocialGovernanceコンプライアンスの徹底

Governance

ESG Initiatives Governance

GovernanceDialogue with Shareholders
and Investors

CSR Management
Promoting CSR Activities
The Sanki Engineering Group promotes CSR activities through a Group-wide
effort based on its Code of Conduct and Action Guidelines, and deliberation
and review of important matters concerning CSR are conducted by the
Corporate Ethics Committee. Under this system, we pursue our CSR initiatives
in each phase of our value chain while ensuring communication with diverse
stakeholders and reflecting societal demands in our business activities.

Basic Philosophy

Reference
Corporate Ethics Committee
P. 70

Major Methods of Engagement

We construct buildings andfacilities and provide systems
and technical services for a broad
range of social infrastructure
projects.

•	Resolve issues for customers andsociety at large•	Provide construction and technicalservices with high added value•	Enhance customer satisfaction in termsof quality, delivery, and cost•	Dialogue through sales activities
and meetings•	Websites and showrooms•	Exhibition at trade shows andexchange of views

Shareholders
and Investors

Number of shareholders:approx. 3,381 (as of March
31, 2019)

Sanki Engineering has approx.
63 million shares outstanding.
Financial institutions account for
about 43% of ownership, foreign
corporations for about 30%, andindividuals and others for about
16% (as of March 31, 2019).

•	Enhance corporate value•	Ensure a stable return of profits andappropriate allocation of management
resources•	Conduct timely and adequate disclosureof corporate information•	General shareholders meeting andshareholder reports•	Results briefings, one- on-one
IR interviews, and response toinquiries•	IR website, and SANKI REPORTBusiness
Partners

Subcontractors, generalcontractors, material/machinery manufacturers,
building maintenancecompanies, etc.

Business partners offer crucial
support to Group operations
through the Subcontractor Groupsystem, based on relationshipsof trust fostered over many
years.

•	Build fair, equal, and transparent
business relationships•	Strengthen relationships of trust andcollaboration•	Ensure occupational safety and create
good working environments•	Respect human rights•	Dialogue through daily
procurement activities•	Collaboration and support throughthe Subcontractor Group•	Corporate Ethics Hotline

Collaboration with these partners
constitutes a key element of theGroup’s technological capacity.

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

Employees

Number of employees
Consolidated: 2,394
Non-consolidated: 1,967(as of March 31, 2019)

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

•	Ensure equal opportunity and fairevaluation•	Cultivate human resources, develop
capabilities, and promote diversity•	Ensure occupational safety and create
good working environments•	Respect human rights•	Interviews with supervisors andtraining•	Various reporting and consulting
channels•	Labor-Management Council•	Website and intranet

We develop our businessactivities in various areas both inJapan and overseas.

•	Develop social infrastructure•	Pay due consideration to local
communities and the environment•	Disclose information•	Branch and branch office counters•	Briefings related to constructionwork•	Dialogue through contributions tolocal communities

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

•	Comply with laws, regulations, andadministrative guidance•	Pay taxes•	Develop social infrastructure•	Contribute to local disaster prevention•	Various applications•	Branch and branch office counters•	Briefings and reports related toconstruction work•	Dialogue through industry
associations

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

SANKI REPORT 2019◦ Shareholder return

FY2018Promoting dialogue with shareholders

Revitalize the generalshareholders’ meeting
Shareholder attendance

Universities, research
institutions, architecture
offices, etc.

Areas around construction
sites and offices◦ Timely and appropriate information disclosure

Providing consistent, steadyreturns to shareholders[ Primary Goals ]Partners

Local
Communities

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

Important Issues

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

Customers

82

Main Responsibilities of the SankiEngineering GroupSanki Engineering Corporate Governance Guidelines

CSR Management / Dialogue with Shareholders and Investors

WEB■■Key Stakeholders of the Sanki Engineering Group

Outline of Stakeholders

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

19

Increased%
year-on-year
Assessment

Expand opportunities for IR
meetings with domestic andoverseas investors
Aggregate total of companies withwhich individual meetings were held:

50

Assessment

Pay stable dividends in principle andprovide special dividends depending
on business performance

60

Paid an annual dividend ofyen
per share(including a special dividend of 20 yen
per share)

1

Assessment

Retired and acquired
million shares ofCompany stock,
respectively

Assessment

Major Action Policy for FY2019
Enhance materials and content
intended for shareholders

Increase opportunities for
dialogue with shareholders

Disclose a clear shareholder return
policy (targets)

SANKI REPORT 201983

ESG Initiatives
Environment

SocialGovernance

Information Disclosure Based on Disclosure Policy
Sanki Engineering strives to disclose required corporate information in an easyto-understand, fair, speedy, timely, and appropriate manner pursuant to the
stipulations of our Disclosure Policy.

WEB Disclosure Policy

https://www.sanki.co.jp/en/
ir/disclosure/●● Promoting Timely, Appropriate, and Proactive Information Disclosure
We proactively disclose information beyond legal mandates when we deem
such information to be useful to shareholders and investors, in order to ensure
management transparency. We will promote further penetration of the Sankibrand and understanding of the Company among shareholders and investors
by disclosing our ESG policy as well as basic policies on our financial andcapital management. In addition, we facilitate the effective exercise of voting
rights by shareholders through efforts such as releasing the convocation noticeof shareholders’ meetings well in advance and posting information at an earlydate on our corporate website, in English and Japanese.
●● Communication with Shareholders and Investors
We engage our investors by holding results briefings for analysts andinstitutional investors twice a year. In fiscal 2018, approximately 71 people
participated. We also held 50 individual IR meetings, convened as needed
throughout the year. This year again we exhibited at an IR event for individual
investors to offer information about Sanki Engineering at our booth. We are
actively striving to understand the minds and needs of individual investors
while creating more opportunities for dialogue.

IR exhibition activity

Returning Profits to Shareholders●● Our Basic Policy Concerning Returns to Shareholders and Track Record
In accordance with our basic policy on providing shareholder returns, we
endeavor to provide stable dividends by balancing sustainable corporate
development with returns to shareholders. We invest internal retained
earnings in new businesses and technological development to strengthen
competitiveness and create a basis for business development with theobjective of boosting corporate value.
For fiscal 2018, we paid a full-year dividend of 60 yen, up 25 yen from theprevious year.
In addition, we strived to enhance shareholder returns and improve capitalefficiency by retiring 1 million shares of treasury stock in November 2018 andacquiring another 1 million shares of Company stock, worth approximately 1.2
billion yen, by January 2019.
In the new Medium-Term Management Plan “Century 2025” Phase 2, wewill state our shareholder return policy from fiscal 2019 to 2021 and endeavor
to return more profits to our shareholders.
■■Dividend Payments

FY2015FY2016FY2017FY2018

30

30

35

60

Interim dividend (yen)

9

10

15

20

Year-end dividend (yen)

21

20

20

40

Consolidated payout ratio (%)

35.8

40.6

55.5

40.0

Annual dividend (yen)84

SANKI REPORT 2019

Results briefing

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

WEB
New Medium-Term Management Plan“Century 2025” Phase 2 (Fiscal 2019 to 2021)

Financial Report
and Corporate
Information

https://www.sanki.co.jp/en/
ir/library/doc/century_2025_
phase2_2019.pdf

Financial Report

Page(Notes)Of the year-end dividend for FY2015, 12
yen was an extra dividend.

Corporate Information,
Business Locationsand Group Companies

86

Page

94

Share Information

Page

96

Third-Party Opinion

Page

97

Of the year-end dividend for FY2016, 10
yen was an extra dividend.
Of the interim dividend for FY2017, 5 yen
was an extra dividend.
Of the year-end dividend for FY2017, 10
yen was an extra dividend.
Of the year-end dividend for FY2018, 20
yen was an extra dividend.

Financial Report and Corporate Information

Financial Report

Financial Report and Corporate Information

11- year Consolidated Financial Summary（Millions of yen）

Year ended March 31,
2009

Year ended March 31,
2010

Year ended March 31,
2011

Year ended March 31,
2012

Year ended March 31,
2013

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

Year ended March 31,
2016

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

Fiscal year
Orders received

188,653

143,348

147,129

175,291

165,800

168,295

173,398

183,270

185,880

191,113217,096

Balance carried forward

93,566

77,641

72,976100,272

111,414108,219

102,019

106,388

123,756

144,712

149,495
212,314

Net sales

203,340

159,273

151,794

147,994

154,658

171,496

179,598

178,901

168,512170,157

Selling, general and administrative expenses

14,97815,41915,763

15,712

15,19915,60415,015

16,41916,526

18,466

21,046

Operating income or loss

7,125

5,027

3,843

2,525

2,391

2,818

2,951

6,509

6,012

6,593

10,637

Ordinary income or loss

6,900

5,456

4,239

2,268

2,680

3,146

3,809

8,135

6,880

7,434

11,204

Profit (loss) attributable to owners of parent*

3,283

3,141

2,124

176

△ 4,992

1,763

2,461

5,327

4,698

3,906

9,046

Cash flows from operating activities

19,177

1,294

11,554△ 2,697

9,729△ 9,403

△ 139

5,220

10,845

6,306

6,786

Cash flows from investing activities

1,726△ 1,664

2,610△ 1,046△ 9,481△ 3,506

3,440

5,520

△1,644△2,510△3,775

Cash flows from financing activities△ 4,377△ 2,936△ 1,883△ 280△ 1,028△ 4,152△2,901△ 1,826△2,458

1,814△5,21536,14232,82545,13541,09740,36723,51023,66732,501

39,18744,866

42,612

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

176,664

163,307

158,501

163,120

166,477

170,181

176,382

169,423

166,612

177,014

195,32178,78080,49879,833

79,662

76,932

74,91784,86984,55785,961

86,191

89,772

Number of employees

2,239

2,272

2,316

2,289

2,246

2,283

2,282

2,309

2,339

2,384

2,394

Financial Report

Total assets
Net assets

Per share information
44.45

42.86

29.67

2.46

△ 71.04

26.46

38.30

83.84

73.91

63.02

150.02

1,065.77

1,119.40

1,115.41

1,113.70

1,106.32

1,142.74

1,334.65

1,328.60

1,350.08

1,419.77

1,502.53

15.00

15.00

15.00

15.00

15.00

15.00

20.00

30.00

30.00

35.00

60.00

Equity ratio (%)

44.6

49.3

50.3

48.8

46.2

44.0

48.1

49.8

51.5

48.6

45.8

Return on assets (%)

3.5

3.2

2.6

1.4

1.6

1.9

2.2

4.7

4.1

4.3

6.0

Return on equity (%)

4.1

3.9

2.7

0.2

△ 6.4

2.3

3.0

6.3

5.5

4.5

10.3

Earnings per share (yen)Book-value per share (yen)Cash dividends (yen)Other information*The revised Accounting Standard for Business Combination and other standards have been applied since fiscal 2015.
Accordingly, “Profit (loss) attributable to owners of parent,” as listed in fiscal 2015 and after, is equivalent to “Net income”
listed for the consolidated fiscal years between fiscal 2008 and fiscal 2014.

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

Orders received and sales

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

(Yen)

80
15,000200,000

(%)

620
600

60

150,000

580

10,0004060

100,000
5,000
50,000

40
20
20

0

0

0
-50,000-5,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

（FY）

0

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

-100,000-150,00086

2008

SANKI REPORT 2019

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018 （FY）-10,000

SANKI REPORT 201987

Financial Report and Corporate Information

Consolidated Balance Sheet(Millions of yen)
As of March 31, 2018
Assets

As of March 31, 2018

As of March 31, 2019

¥ 49,854¥ 68,286

6,894

6,874

Liabilities and Net Assets

Current assets:

Liabilities:¥ 42,612

Notes and accounts receivable on completed construction contracts and other64,45885,243

Notes and accounts payable on construction contracts and other

Electronically recorded monetary claims

5,878

6,562

Short-term loans payable

Securities

4,199

2,000

Lease obligations

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

Income taxes payable
1,852

2,049

569

558

2,076

2,316

(0)

(0)

122,901

141,342

Noncurrent assets:
Property, plant and equipment:
36,86442,214

Accumulated depreciation(32,163)(32,840)

Buildings and structures, net

4,701

9,373

Buildings and structures

Machinery, equipment, vehicles, and tools, furniture and fixtures
Accumulated depreciation
Machinery, equipment, vehicles, and tools, furniture and fixtures, net
Lease assets
Accumulated depreciation
Lease assets, net
Construction in progress
Total property, plant and equipment

Intangible assets

2,104

1,967

(1,701)(1,601)

402

365

3,709

3,450

698

712

(267)

(319)

431

392

1,418

747

10,662

14,329813

688

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

31,927

27,879124

111

Asset for retirement benefits

4,759

4,411

Lease and guarantee deposits

1,386

1,479

Insurance funds

567

336

Deferred tax assets

531

1,264

3,439

3,395

2,654

4,180

Provision for directors’ bonuses

160

242

Provision for warranty costs

513

360

Provision for loss on construction contracts

1,058

480

Other

5,386

4,594

Total current liabilities

73,78791,317

6,610

5,220

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

369

280

2,884

3,120

Provision for directors’ retirement benefits

61

52

Provision for compensation for damages–

190

Deferred tax liabilities

2,187

40

Other

4,922

5,328

Total noncurrent liabilities

17,035

14,23290,822

105,549

Total liabilities
Net assets:
Shareholders’ equity:
Capital stock

8,105

8,105

Capital surplus

4,182

4,181

Retained earnings

67,84473,250Treasury stock(3,736)(3,700)Total shareholders’ equity

76,39581,836

11,687

9,450

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

(12)

(94)

Retirement benefits asset and liability adjustments(2,058)(1,652)

Total accumulated other comprehensive income

9,616

7,704

Foreign currency translation adjustment

5,452

5,559

(2,112)(2,082)

Total investments and other assets

42,63638,961

Subscription right to shares

54,112

53,979Total net assets¥ 177,014¥ 195,321

SANKI REPORT 2019

2,510

Advances received on uncompleted construction contracts

Other

Total assets

392

3,691

Provision for bonuses

Allowance for doubtful accounts
Total noncurrent assets

133

Financial ReportLand

Current liabilities:

Financial Report and Corporate Information¥ 43,866

Cash and deposits

88(Millions of yen)

As of March 31, 2019

Total liabilities and net assets

179

231

86,191

89,772¥ 177,014¥ 195,321

SANKI REPORT 201989

Financial Report and Corporate Information

Consolidated Statement of Income and Comprehensive Income

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

Year ended March 31, 2018Year ended March 31, 2019[For the year ended March 31, 2018 ](Millions of yen)

Net sales:
Net sales of completed construction contracts
Net sales of real estate business and otherTotal net sales¥ 168,266¥ 210,245
2,069

170,157

212,314

143,863

179,255

1,233

1,375

145,097

180,630

24,40330,990656

694

25,06031,684

Employees’ salaries and allowances

6,578

7,058

Provision for bonuses

1,194

1,785

Provision for directors’ bonuses

162

242

Retirement benefit expenses

1,118

775

421

888

Other

8,990

10,297

Total selling, general and administrative expenses

18,466

21,046

6,593

10,637

Cost of sales on real estate business and otherTotal cost of sales
Gross profit:
Gross profit on completed construction contracts
Gross profit on real estate business and otherTotal gross profit

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

Capital stock¥ 8,105

Capital surplus¥ 4,181

Retained earnings¥ 68,314

Treasury stock
Total shareholders’ equity¥ (2,251)¥ 78,348(2,195)
3,906(2,180)(3,679)13
2,180(2,195)
3,906(3,679)14–(469)¥ 67,844(1,485)¥ (3,736)(1,953)¥ 76,395

1–¥ 8,1051¥ 4,182

Financial Report and Corporate Information

1,890

Cost of sales:
Cost of sales of completed construction contracts

Shareholders’ equity

Selling, general and administrative expenses:

Depreciation

Operating income
Non-operating income:

30

20

Dividends income

683

596

Waste disposal income

91

171

Other

408

202

1,214

991

Interest expense

76

142

Loss on insurance cancellation

13

57

Other

283

224

Total non-operating income

Unrealized gains on Foreign currency
available-for-saletranslation
securities
adjustment
Balance at the beginning of current period
Changes in items during the period
Dividends from surplus
Profit (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of current period¥ 10,928¥ (125)759
759¥ 11,687

Retirement
Total accumulated Subscription rights
benefits asset
otherto shares
and liability
comprehensive
adjustments
income¥ (3,337)¥ 7,465
¥ 126

112
112
¥ (12)

1,278
1,278¥ (2,058)

2,150
2,150
¥ 9,616

Non-controllinginterests

Total net assets¥ 19¥ 85,961

(19)
(19)
¥–

(2,195)
3,906(3,679)
14
–
2,183
229
¥ 86,191

52
52
¥ 179

Financial Report

Interest income

Accumulated other comprehensive income

Non-operating expenses:

Total non-operating expenses
Ordinary income

373

424

7,434

11,204

2,219

1,516

–

601

¥ 2,219¥ 2,118

¥ 194

¥ 808

[For the year ended March 31, 2019]

Extraordinary income:Gain on sales of investment securities
Penalty income
Total extraordinary income
Extraordinary loss:
Impairment loss

54

62

1,333

165

Environmental expenses

203

178

Office transfer expenses

171

15

Loss on valuation of investments in capital of subsidiaries and affiliates

62

197

Loss on support to subsidiaries and affiliates–

379

Provision of allowance for doubtful accounts

1,179

–

–

190

Loss on sales of noncurrent assets
Loss on retirement of noncurrent assets

Provision for compensation for damages
Total extraordinary losses
Profit (loss) before income taxes

3,199

1,996

6,454

11,326

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

4,190

4,385

Income taxes-deferred(1,621)(2,105)

2,568

2,279

¥ 3,885¥ 9,046¥ 3,906¥ 9,046¥ (20)¥–¥ 759¥ (2,237)

Foreign currency translation adjustment

113

(81)

Remeasurements of defined benefit plans

1,278

406

Total other comprehensive income

2,151(1,912)¥ 6,037¥ 7,134¥ 6,057¥ 7,134¥ (19)¥–

Total income taxes
Profit (loss)
Profit (loss) attributable to:
Owners of parent
Non-controlling interests
Other comprehensive income:Unrealized gains on available-for-sale securities

Comprehensive income

Capital stock¥ 8,105

Capital surplus¥ 4,182

Retained earnings¥ 67,844

Treasury stock¥ (3,736)

Total shareholders’ equity¥ 76,395(1,191)14(2,423)9,046(3)(1,213)

1,213(2,423)
9,046(1,191)
10
–
–

5,406
¥ 73,25036¥ (3,700)

5,441¥ 81,836(4)
3–¥ 8,105(1)¥ 4,181

Accumulated other comprehensive income

Income taxes:
Income taxes-current(Millions of yen)
Shareholders’ equity

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

Unrealized gains onavailable-for-salesecurities

Foreign currencytranslation adjustment

Retirement benefits
asset and liability
adjustments¥ 11,687¥ (12)¥ (2,058)(2,237)(2,237)¥ 9,450(81)(81)¥ (94)406
406¥ (1,652)

Total accumulated
othercomprehensive
income¥ 9,616(1,912)(1,912)¥ 7,704

Subscription rights
to shares

Total net assets¥ 179¥ 86,191

52
52
¥ 231

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

Comprehensive income attributable to:
Owners of parent
Non-controlling interests

90

SANKI REPORT 2019

SANKI REPORT 201991

Financial Report and Corporate Information

Consolidated Statement of Cash Flows(Millions of yen)
Year ended March 31, 2018Year ended March 31, 2019

Cash flows from operating activities:¥ 11,326

818

1,340

Impairment loss

194

808

1,333

165

Loss on retirement of noncurrent assets
Office transfer expenses

171

15

Environmental expenses

203

178

Loss on valuation of investments in capital of subsidiaries and affiliates

62

197

Loss on support to subsidiaries and affiliates–

379

Increase in provision for compensation for damages
Increase (decrease) in allowance for doubtful accounts
Increase in provision for bonuses
Increase in liability for retirement benefits

–

190

1,145

(21)

369

1,525

2,191

1,171

Decrease in provision for directors’ retirement benefits

(17)

(9)

Increase (decrease) in provision for loss on construction contracts

87

(578)

(714)

(617)

Interest expense

76

142

Loss on sales of property, plant and equipment

54

62(2,219)(1,516)

Interest and dividends income

Gain on sales of investment securities
Penalty income
Increase in notes and accounts receivable on completed construction contracts and other

–

(601)

(3,546)(21,467)

(159)

(197)

Increase in notes and accounts payable on construction contracts and other

1,092

18,912

Decrease in advances received on uncompleted construction contracts(2,289)

(42)

206

124

Increase in other current liabilities
Other

1,708

20

Subtotal

7,222

11,507

Interest and dividends received

713

615

Interest paid

(76)

(143)

(1,482)(5,542)

Income taxes paid
Income taxes refunded
Penalties received

130

–

–

601

Payments for office transfer expenses

(124)

(62)

Payments for environmental expenses

(76)

(190)

¥ 6,306¥ 6,786¥ (1,500)¥–

Net cash provided by operating activities

Financial Report

Increase in costs on uncompleted construction contracts

Financial Report and Corporate Information¥ 6,454

Depreciation and amortization

Profit (loss) before income taxes

Cash flows from investing activities:
Payments into time deposits

300–

Purchase of securities(13,500)(19,000)

Proceeds from redemption of securities

12,30020,200Purchase of property, plant and equipment(2,290)(6,447)

Proceeds from withdrawal of time deposits

Proceeds from sales of property, plant and equipment
Payments for retirement of property, plant and equipment

7

51

(971)

(599)

Purchase of investment securities

(324)

(30)

Proceeds from sales of investment securities

4,151

2,198

Execution of loan

(0)

(376)

Collection of loans receivable

80

15Proceeds from maturity of insurance funds

46

296

(810)

(84)

(2,510)(3,775)

Net increase in short-term loans payable

169

(19)

Proceeds from long-term loans payable

8,000

–

Repayments of long-term loans payable(320)(1,390)(3,679)(1,191)Other
Net cash used in investing activities
Cash flows from financing activities:

Purchase of treasury stock

0

0

(160)

(191)

Cash dividends paid

(2,195)(2,423)

Net cash (used in) provided by financing activities

1,814(5,215)

Proceeds from exercise of stock options
Repayments of lease obligations

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

92

SANKI REPORT 2019

68

(48)

5,679

(2,254)

39,18744,866¥ 44,866¥ 42,612

SANKI REPORT 201993

Financial Report and Corporate Information

Corporate Information, Business Locationsand Group Companies

Corporate Information

Domestic Business Locations

Financial Report and Corporate Information

The Sanki Engineering Group aims to build a comfortable environment for people and the Earth by leveraging “total
engineering competency” in a wide range of regions and business domains. Together with our customers, we will strive
as a group to contribute to the realization of a sustainable society. (as of April 1, 2019)

Representative Offices and Group Companies Overseas

Company nameSanki Engineering Co., Ltd.

● Representative officeGroup company

Date of establishment
April 22, 1925

Hokkaido
branchofficeStated capital
8,105.18 million yen
Representative
Tsutomu Hasegawa, President

Number of employees (as of March 31, 2019)
Consolidated: 2,394
Non-consolidated: 1,967

Toyota branch office

Chugoku branch office
Kyoto branch
officeIbaraki branch office

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

94

SANKI REPORT 2019

AEROSTRIP
Corporation
Sale of aeration systems

Chiba branch office

Kyushu branch office

Head office
Tokyo branch
Yokohama branch office

Mikawa branch
officeShikoku branch officeKansai branch
Kobe branch
officeSanki Techno Center
R&D Center

Shizuoka branch office

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

Facility design, construction,
maintenance and consulting

Kanto branch office

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

Sanki Construction Engineering(Shanghai) Co., Ltd.

Tohoku branch office

Chubu branch

Corporate Information, Business Locations and Group Companies

Principal lines of business
Facilities construction, plant and machinery
systems, real estate

Hokuriku branch office

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

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

Austria Office
AQUACONSULT
Anlagenbau GmbH
Manufacture and saleof aeration systems

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

Non-consolidated Subsidiaries

Affiliate Not Accounted for by the Equity Method

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

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

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

SANKI REPORT 201995

Financial Report and Corporate Information

Share Information

Third-Party Opinion

Share Information (as of March 31, 2019)
Ownership Statistics

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

62,661,156

Number of shareholders

3,381

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

Individuals and other: 3,008
10,016 thousand shares(15.98%)Treasury stock: 1
3,067 thousand shares(4.90%)

Foreign corporations and other: 183
18,520 thousand shares(29.56%)

Financial institutions: 38
26,811 thousand shares(42.79%)Other corporations: 121
3,822 thousand shares(6.10%)

Securities companies: 30
423 thousand shares(0.68%)■   M ajor Shareholders

Number of Shares Held(Thousand Shares)

Shareholding Ratio(%)

Meiji Yasuda Life Insurance Company

5,700

9.56

Mitsui Life Insurance Company, Limited

4,864

8.16

Nippon Life Insurance Company

3,607

6.05

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

3,018

5.06

Sanki Kyoueikai

2,631

4.41

Japan Trustee Services Bank, Ltd. (Trust account)

2,351

3.95

DFA International Small Cap Value Portfolio

1,313

2.20

Sanki Engineering Employee Shareholding Association

1,155

1.94

JP Morgan Chase Bank 380684

1,014

1.70

Japan Trustee Services Bank, Ltd. (Trust account 5)

1,006

1.69

Name of Shareholder*1 Although the Company holds 3,079 thousand shares of treasury stock, it is excluded from the list of major shareholders. Calculation of shareholding ratio excludes
treasury stock.
*2 The list covers beneficial shareholders whose shareholdings as of the end of the fiscal year under review had been confirmed by the Company.
*3 Mitsui Life Insurance Company, Limited changed its name to Taiju Life Insurance Company, Limited as of April 1, 2019.

96

SANKI REPORT 2019

Yoshinao Kozuma
Professor Emeritus,
Sophia University

1. Enhanced ESG Performance Based on
Operational Improvements
Sanki Engineering has been addressing
global warming in its downstream
value chain by providing products andtechnologies that help reduce CO2
emissions and linking them to the EcoContribution Point System. It has alsoestablished its public standing as acompany that contributes to the realizationof a low-carbon society such as throughthe Agency of Natural Resources andEnergy Director General Prize of theannual Energy Conservation Grand Prizein January 2019 for an energy-saving
project for an entire hot-spring districtin the Yunohama area of Tsuruoka City,
Yamagata Prefecture. I highly commend
this achievement as a clear case of
successful ESG management. These
efforts will bear fruit by winning customer
trust, which in turn will become a factor
that sustains long-term corporate growth.
In its latest report, the Company has also
disclosed the results of the customer
satisfaction survey, which began in fiscal
2017. The results show a high level ofcustomer satisfaction in construction
quality, backed by a significant drop in thenumber of problems and claims, which
seems to indicate a steady strengtheningof trust. Meanwhile, the digital manifest
system was introduced throughout theCompany in fiscal 2018, and increased use
is being made of the JOB Environmental
Aspects Assessment List in assessing
the environmental risks of a project prior
to construction. I expect these efforts will
enhance ESG performance.
2. Expansion in Industrial Health and Safety
Initiatives
While the construction industry is a sector
with a higher rate of accidents due toits business model, the Company saw a
sharp decline in the number and frequency
rate of accidents in fiscal 2018, and ESG
performance also improved in this area.
Based on an analysis of accidents that
occurred in fiscal 2017, the Policy of theCentral Safety and Health Committee
Chairperson for fiscal 2018 emphasizedboosting collaborative measures byconstruction sites, subcontractors,
and Sanki Engineering as a key action,
and a special effort was made to
expand preventive measures targeting
subcontractors. For example, as inprevious years, the Company spent twice
as much time than legally mandated toprovide a safety seminar for Vietnamese
technical interns at a subcontractor,
responding to the growing number offoreign workers in the constructionindustry. It also convened a meeting of
the Sanki Health and Safety Cooperative
Association in December 2018 to raiseawareness of health and safety among
subcontractors. I praise these endeavors
along with the policy of making the Sanki
Techno Center available to employees ofsubcontractors and view these efforts as
a demonstration of Sanki Engineering’s
unwavering commitment.

3. Advances in Work-Life Balance Data
Another major notable achievementof this fiscal year was the disclosureof consolidated data on the ratio ofreinstatement after childcare leave.
Consolidated data was also provided forthe paid leave ratio. In terms of initiatives,
the Company eliminated the limits on thefrequency of applying for half-day leave asa result of promoting workstyle reform.
However, increasing the number of days
off does not actually reduce the work load
itself, so I expect the Company to consider
additional measures to actually prevent
overwork and boost productivity.
4. Challenges Ahead
The Company provided consolidated data
for the employment ratio of persons withdisabilities. It has been unable, however,to meet the statutory requirement for
four consecutive years, which calls for
improvement. Meanwhile, in contrast to
its substantial downstream initiatives, theresults of the Company’s global warming
initiatives in its upstream value chain
remain unclear and require some work,
such as adding intensity data to allow forcomparisons, and this applies to otherenvironmental data as well. Furthermore,industrial waste discharged by theCompany has been rising over the years,
necessitating a response. Also, while
respecting human rights in the supply
chain is cited as an important responsibilityof the Group, the report does not provide
any information on related measures,
which is another major challenge to beaddressed.

Response to Third-Party Opinion
We are sincerely grateful for the valuable insights and multiple perspectives you have provided on the SANKI REPORT 2019.
This is the eighth fiscal year since we started publishing an integrated report, and we appreciate your evaluation of our enhanced
ESG performance based on operational improvements and expansion in industrial health and safety initiatives as well as the improvementin our work-life balance data. We will continue to strengthen our ESG management while striving to provide a report that is both useful
and appealing for all of our stakeholders.
We will consider, as challenges going forward, the employment ratio for persons with disabilities and our disclosure of and response
to environmental data, including the results of our global warming initiatives in our upstream value chain, which were pointed out thisyear, and endeavor to make improvements while also providing detailed explanations.
By utilizing the SANKI REPORT to further advance our business activities, we will seek to continuously contribute to social
development by creating comfortable environments and operations.

Hirokazu Ishida

Director, Senior Executive Officer and General Manager, Management Planning Office

SANKI REPORT 201997