Contents

04

Introduction
04 Management Philosophy

43

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

Foundation of
Sustainability Management
43 Sustainability Management
44 Sanki Engineering Group
Value Chain
Environment

46 Environment

16
20
26

Social

Message from the President

Sanki Engineering’s Future Vision
and Value Creation

Growth Strategies andSustainability Management
26 Status of the Medium-Term Management Plan“Century 2025” Phase 3 (FY2022–2025)

32
33

91

Feature 2

Our Technological Contribution to Sewage
Treatment Facilities

34 Facilities Construction Business
37 Facility Systems Business
39 Plants & Machinery Systems Business

SANKI REPORT 2023

73 Corporate Governance
82 Dialogue between President
Ishida and External Director
Umeda
84 Compliance
87 Risk Management
90 Dialogue with Shareholders andInvestors

Sanki Engineering Group’s DX Strategy
Feature 3

Quality Control
Occupational Health and Safety
Supply Chain
Human Rights
Human Resources
Local Communities

Governance

20 Our Value Creation Process
22 Management Resources of the SankiEngineering Group
24 Sanki Engineering Group Materiality

29 Message from the Chief Financial Officer
30 Feature 1
Sanki Engineering Group’s Initiatives forAchieving Carbon Neutrality by 2050

02

55
59
61
64
65
71

102

Financial Report andCorporate Information
91 Share Information
92 Financial Report
100 Corporate Information,
Business Locations, and Group
Companies

Third-Party Opinion

Editorial Policy
Boosting Understanding of the Sanki Engineering GroupWe have positioned the SANKI REPORT, the annual report of SankiEngineering, as a key, integrated communication tool for reaching all
our stakeholders. We hope it will boost understanding of the SankiEngineering Group’s business activities and future direction, and wewelcome feedback for enhancing our operations and information
disclosure.
Key content included in the 2023 report is listed below.
• Management resources that drive the Sanki Engineering Group’s
value creation are explained in “Sanki Engineering’s Management
Resources“ (pages 22 and 23).
• Views are exchanged on governance and the future direction of
the Sanki Engineering Group in “Dialogue between President Ishida
and External Director Umeda” (pages 82 and 83).
Major information added to our disclosure includes the following.
• Indicators and targets for human resource strategy and humanresource development (page 65)• Difference in wages between male and female workers (page 66)• Frequency of Advisory Committee on Nomination andRemuneration meetings (page 73)• Status of IR meetings (page 90)

Reference Guidelines• “International IR Framework” of the IFRS Foundation• Ministry of Economy, Trade and Industry’s “Guidance for Integrated
Corporate Disclosure and Company-Investor Dialogues for
Collaborative Value Creation 2.0”
• GRI Sustainability Reporting Standards 2016, 2018, 2019, 2020, and2021• Ministry of the Environment’s “Environmental Reporting Guidelines
2018”• ISO 26000

Organizations Covered by the Report
The Sanki Engineering Group, which consists of Sanki Engineering
Co., Ltd. and its eight subsidiaries.
• Non-financial information is based on non-consolidated figures
for Sanki Engineering Co., Ltd. When the information concerns theGroup, organizations covered by the data are specified in the text,
list, or graph.

Reporting Period
April 2022–March 2023 (Some information from outside this period
has also been included.)

Publication Date
September 2023 (previous issue: September 2022; scheduled releaseof next issue: September 2024)

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

SANKI REPORT 2023

03

Sanki Engineering Group Management Philosophy

Sanki Standard

We create comfortable environments
through engineering and widely contributeto social development.

04• We will refine our skills and wisdom with the aim of increasingclient 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.

05

︱Introduction ︱From

HISTORY
History of Sanki Engineering

Sanki Engineering has developed its
business in step with the modernizationof Japanese industry over the past nine
decades. Under the Sanki EngineeringGroup Management Philosophy, “We create comfortable environments throughengineering and widely contribute to1925

Laying the Base for Technological Competence
by Meeting the Needs of the Era• Begins businesses
including heating,plumbing, andbuilding materials• Launches the electricalsystems business• Installs Japan’s
first centralized air
conditioning system
for an entire structure
Mitsui main buildingat Mitsui’s mainbuilding

1930s

1960s

1990s

Manufacturer that Responds to the Needsof the Times• Completes work on HVAC, plumbing, and electrical systems for Japan’s
first skyscraper, the Kasumigaseki Building• Develops the standardized “6S sash” and gains the top market shareamong steel sash manufacturers• Completes work on HVAC and plumbing for the Yoyogi National Stadiumused in the Tokyo Olympic and Paralympic GamesFirst President,
Meijiro Yasumoto

Diversified and Expanded Businesses Lead to Greater
Technological Competence• Develops and installs a proprietary incinerator for facilities in the Sanshin
Building• Establishes Toyo Carrier Industries together with U.S.-based Carrier Engineeringand launches the air conditioning business• Completes work on the Tokyo Office of Nippon Life Insurance Company (currently
Takashimaya Nihon-bashi department store)

6S sash1970s

continue to lead the way toward a newage, with the power of technology, andtoward its 100th anniversary in 2025.

Meeting the Needs of a Rapidly Advancing
Information Society• Advances network systems, including LAN, building monitoring, andautomated control

Wide Range of Technological Innovations• Completes work on Japan’s first large-scale clean room at NEC’s
Sagamihara plant• Develops the world’s first completely unmanned automatic sorting
system and airport baggage handling system• Provides HVAC equipment for satellite communication ground stationsin the Middle East and other regions and builds automotive testing
equipment in Russia

social development,” the Company will

• Develops environmentrelated technology, including
an ice thermal storage system,
advanced sewage treatment
systems, fuzzy combustion
control technology, andgasification and melting
furnaces• Develops technologies
related to clean rooms
Advanced sewage treatment systemfor pharmaceuticaland semiconductor
manufacturing plants

2000s

Yoyogi National Stadium (at the time)

Driving Progress in Environmental andInformation Technologies• Establishes the Energy
Solution Center to promoteand develop the energysaving business and provide
sales support• Develops and begins sale ofclean conveyor facilities in
response to growing demand
for liquid crystal displays andorganic EL panels

Sanshin Building
Nippon Life Insurance Company Tokyo Office

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

1940s

Sanki’s Advanced Technology Bolsters aConstruction Boom

• Starts manufacturing conveyors• Concludes sales contracts formachinery used in mining-related
chemistry with U.S.-based Dorr Inc.
and Oliver, Inc.
• Completes work on the mainbuilding of the Dai-ichi Life Insurance
Company, Japan’s first building
with the special high-voltage power
reception of 22 kV

1950s

1925

1920

1930

April 22, 1925
Sanki Engineering isestablished
Capital of 500,000 yen
and 12 employees

 931
1Moves the head office to
Hibiya
1935
Celebrates the tenthanniversary of its founding,with five branches, six field
offices, three affiliates, andaround 300 employees

History of Sanki Engineering

World Events

1923
Great Tokyo Earthquake

1940

1945

End of World War II

Clean room

Main building of Dai-ichi Life Insurance

Proactive Approach to Technological Innovation• Completes work on Japan’s first allfluorescent lighting system in the
Taisho Marine and Fire Insurance
Building• Becomes involved in night-soil
treatment plant disposal facilities in
response to urban hygiene needs• Delivers a roller conveyor to theJapanese Antarctic Research
Expedition II

Established in

2010sNight-soil treatment plant1980s• L aunches the information and communications business• L aunches the facility systems business to deal with office integrationand moving• Established a Group company to handle operations and management aswell as the repair and maintenance of Sanki facilities

Facility Systems Business

1960

1970

1980

 950
1
The Japanese economy takes a favorable
turn, and the expansion in demand forbuilding construction and equipment
results in a dramatic improvement in the
Company’s business performance, lists
shares on the Tokyo Stock Exchange
1958
Capital exceeds 1 billion yen 963
1Completes the Sagami
plant (currently the Sanki
Yamato Site), which tailors
production equipment for
conveyor mass production

 971
1
Sets up the Environmental
Administration Office
1973
Spins off the sash business 982
1
Builds the Technical ResearchLaboratory

1958

Opening of Tokyo Tower

1964

Tokyo Olympics

1970Japan World Exposition, Osaka

1972

SANKI REPORT 2023

Contributing to a Sustainable Society
by Bolstering the LCE Business• Promotes the LCE* Business, which is intended to sustain the life cycle ofbuildings and facilities, from planning, design, and construction work tomaintenance, operation/management, renovation, and reconstruction• Wins order for the DBO project, a bulk contract encompassing design,
construction, management, and maintenance• Completes the HVAC, central monitoring, and automated control
systems for the Toranomon Hills Business Tower• Completes HVAC, plumbing, and electrical systems (renewal) for Yoyogi
National Stadium 1st Gymnasium used in the Tokyo 2020 Olympic andParalympic Games*Life-cycle engineering

Yoyogi National Stadium 1st Gymnasium

1950

Reversion of Okinawa

06

Rising to the Challenge of New Businesses

Clean conveyor

1986Japan’s Equal Employment
Opportunity Law

1990

1991 C ollapse of Japan’s bubble
economy1995 G reat Hanshin Earthquake
1997 A doption of the Kyoto

2000

2010

 000
2
Opens the Shonan Training
Center2005
Moves the head office to
Nihonbashi

 011 Moves the head office to Tsukiji
2
 015 90th Anniversary
2 016 Launches the long-term vision “Century 2025”
2
 018 Begins operations at all facilities of the Sanki
2
Techno Center 019 Begins operations at the Yamato Product2
Center2008 Lehman Brothers
bankruptcy

 011 Great East Japan Earthquake2
 015 Adoption of SDGs2
 019 Lapan changes era name to “Reiwa”
2

ProtocolSANKI REPORT 2023

07

︱

2050

Introduction ︱Promoting Sustainability Management

Sanki, the “Enduring
Company of Choice”

toward Our Vision for 2050—

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

Sanki, the Enduring Company of Choice

2022

2050

Formulation of Sustainability Policies
Aiming to realize a strong business base anda sustainable society by “creating comfortableenvironments through engineering and widely
contributing to social development”

1

Phase

FY2019–2021

2

3

P. 24

4-year period to become
the company of choice2030
MIRAI 2030

3-year period to enhance quality
Five material issues“Century 2025”

Im
pro
ve
e
an nvird s onoc me
ial ntva allue

Long-Term Vision

Strengthencorebusinesses

Sanki’s
Carbon Neutral
Declaration

Sanki’s Carbon Neutral
Declaration

Pursuit ofhappiness forcolleagues

Contribute toa carbon-freesociety

Contributeto thesustainabilityof societyManagement
Philosophy

Promotegrowthstrategies

Accelerate
work stylereforms

We create comfortableenvironments throughengineering and widely
contribute to social
development.

Strengthen
information
dissemination
capabilities

Invest toward
the next era

Financial andcapital ESG

P. 04

Five Material Issues

3-year period to enhance reliability

PhaseManagement
Philosophy

FY2022–2025

Phase

FY2016–2018

Sanki Engineering’s
Sustainability
Management

P. 25

Create newsocial value

Medium-Term
Management Plan
P. 26

Stableearnings
and stronger
businessbase

Enhance the
Sanki brandUse
engineering
to build acomfortableenvironment

Improve corporate value

2020
2022

History of Sanki Engineering

World Events• Formulated the Sustainability Policies• Sanki’s Carbon Neutral Declaration

2020

Global COVID-19 pandemic

2021  

2022

2025

100th
anniversary

Russian invasion of Ukraine

Tokyo 2020 Olympic andParalympic Games08

SANKI REPORT 2023

SANKI REPORT 2023

09︱

Introduction ︱Business Overview by Segment(Year ended March 2023)

Facilities Construction Business
Net Sales

155.7billion yen*

Net Sales
Composition Ratio

82%

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

76%

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

Main Sales Items

Net Sales
Composition
Ratio● HVAC and Plumbing for Buildings• HVAC systems• Industrial HVAC
systems• Clean rooms• Environmental
control systems• Electrical systems • Telecommunication systems • Electrical civil engineering%● Facility Systems

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

• Project management and designing of fit-out and relocation of offices andworkplaces• Consulting involving overall work style

Main Sales Items

6• Nuclear power-related facilities• Semiconductor manufacturing facilities• Battery manufacturing facilities• Plumbing system for water supply anddrainage• Food service equipment• Disaster prevention systems● Electrical Systems

Facility Systems Business
Net Sales
Composition
Ratio• Pharmaceutical andfood manufacturing
facilities• Freezing andrefrigeration• District heating andcooling plants● Smart Building Solutions• Central monitoring and automatedcontrol systems• ITC solutions• Crisis management (BCP) solutions• IP phone solutions• S ecurity-related solutions

Plants & Machinery Systems Business
Net Sales

32.8 billion yen*

Net Sales
Composition Ratio

17%

Machinery Systems Business

4%

Main Sales Items

Net Sales
Composition
Ratio

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

● Conveyance Systems

Environmental Systems Business%• Sorting devices• Distribution-related conveyors• Automated warehouse● Material Handling Systems• FA systems• Airport baggage and cargo handling systems• Clean conveyance systems• Medical handling systems• Material handling systems• Handling information control systems● Water Treatment

Main Sales Items

13

Net Sales
Composition
Ratio

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

• Lightweight conveyors• Water and sewage treatment facilities• General and industrial waste disposal
and recycling facilities• Sludge recycling facilities● Waste Treatment• Waste incineration facilities• Landfill wastewater treatment facilities

10

SANKI REPORT 2023

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

Group Companies

Major Projects

Organization (as of April 1, 2023)

Facilities Construction Business● Sanki Techno Support Co., Ltd.

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

● Tomakomai Netsu Service Co., Ltd.

● CAD-KENDORO Co., Ltd.

Management Meeting

HVAC and Plumbing for Buildings Business Industrial HVAC Business

Secretarial Office

Supercomputer Fugaku

Electrical Systems Business

Board of Company
Auditors

President● Thai Sanki Engineering & Construction Co., Ltd.

Kurita Innovation Hub, Kurita Water Industries Ltd.

Smart Building Solutions Business

Mechanical &Electrical Contracting Headquarters

Internal Audit Office

Sales Administration Division

Management Planning
OfficeTechnical Administration Division

Legal Affairs Office

Procurement Division

Labor Safety and Health
Promotion OfficeInternational Business
Administration Division

Chief Cost Inspector
OfficeTokyo Branch
Yokohama Branch OfficeInformation Systems
OfficeFacility Systems Business

DX Promotion Division
Sustainability Promotion
Division
General Affairs andHuman Resources Division
Toranomon Hills Business Tower

Nippon Life Yodoyabashi Building

Kanae Tochigi Factory No. 3 Factory Building

Accounting Division
Sanki Techno Center
Technical Research &Development Center

Group Companies
Machinery Systems
Business

Major Projects

Ibaraki Branch OfficeKansai Branch
Kyoto Branch Office
Kobe Branch Office
Shikoku Branch Office

Shizuoka Branch Office

Machinery Systems BusinessToyota Branch Office
Mikawa Branch OfficeEnvironmental Systems
Business

Kyushu Branch Office● Sanki Kako Kensetsu Co., Ltd.

Hokkaido Branch Office● Sanki Kankyo Service Co., Ltd.

Chugoku Branch Office● AQUACONSULT Anlagenbau

GmbH

Chiba Branch Office

Chubu Branch● Sanki Sangyo Setsubi Co., Ltd.

● AEROSTRIP Corporation

Kanto Branch OfficeEnvironmental Systems Business

South Wing of Narita International Airport’s Terminal 1

Minami-Gamo Purification Center● Sendai Kankyo Hozen Co., Ltd.

Tohoku Branch Office
Hokuriku Branch Office● PFI Okubo Techno ResourceCo., Ltd.

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

SANKI REPORT 2023

Clean Hill Tenzan

11

SANKI REPORT 2023

12

P. 34

Facilities Construction Business

HVAC and
Plumbing
for Buildings
Business

Industrial HVAC
Business

31%

31 %

Net Sales for Fiscal 2022

190.8

billion yen*

Electrical Systems
Business

14 %Environmental
Systems Business

Machinery Systems
Business

13 %4%Facility Systems
Business

6%

Plants & Machinery
Systems Business
Real Estate Business 1 %P. 39

Note:Includes items not listed in the graph,such as 0.5 billion yen in other net sales
and 0.8 billion yen in elimination ofintersegment transactions.

Real Estate Business

2.4 billion yen*

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.

13

SANKI REPORT 2023

Net Sales
Composition Ratio

1%● Real Estate Leasing

Main Sales Items

Net Sales• Land leasing• Building leasing● Building Maintenanceand Management• Facility maintenance andupgradesSANKI REPORT 2023

︱

Introduction ︱Financial and Non-Financial Highlights

Financial Data (Consolidated)

Non-Financial Data

Orders Received and Net Sales

Gross Profit Margin■  Orders Received

228.5■ Net Sales
Up 13.0 %year-on-year

217.0 212.3

194.0 207.6● Gross Profit Margin

190.8

billion yen

Down 1.2%
year-on-year

14.2

billion yen

202.2 193.1

195.5 190.0

Number of Employees
Down 1.4 points
year-on-year

228.5

14.9

190.8

%

15.5

15.6

15.1

Consolidated

As of March 31, 2023

2.売上総利益率
14.2

Female2,627

15

Non-consolidated

As of April 1, 2023

Managers:
Male

852,244%%

383

General managers:

Executive managers:

2018

2019

2020

2021

(FY)

2022

2018

2019

Ordinary Income and Profit Attributable to Owners of Parent

Equity Ratio■ Ordinary profit● Equity Ratio

6.2■ Profit Attributable to Owners of Parent
Down 36.4%
year-on-year

4.7

billion yen

11.2
9.0

Down 26.8%
year-on-year

52.6

billion yen

11.2
8.1

7.5

2018

9.8

2019

45.8

5.9

6.4

6.2
4.7

2020

2021

2022

2018

FY2022

Consolidated

Total

%

2019

53.4

51.2

52.6

2020

2021

2022 (FY)

Annual Dividend per Share and Payout Ratio

● ROA

3.5

● ROE
Down 2.0 points
year-on-year■ Extra Dividend■ Ordinary Dividend

5.1

Down 1.9 points
year-on-year

%

%

75

Down 10 yen
year-on-year

yen

10.3

73.9

8.6
6.6

6.0

2018

14

6.0

2019

SANKI REPORT 2023

4.7

2020

● Payout Ratio

87.4
77.6

Up 13.6 points
year-on-year

%

73.8

87.4

7.0

5.1
5.5

3.5
2021

2022 (FY)

40.0
20
40
2018

25
70

2019

10
70

2020

FY2022

27.4

hours

Down 2.2 hours
year-on-year

Male

58.8

15
70

2021

2022 (FY)

Female43.3
100

FY2022

Non-consolidated

18%*

fewer cases

Down 25 %year-on-year%

Female77.9

Volume of GHG Emissions(Scope 1 and 2)

Contribution to CO2 Reductions at Customers throughSanki Products and Technologies (for Ordered Projects)
Consolidated

5.34*Includes Sanki Engineering Group’s own
childcare leave programs.

%

FY2022

Down 32.0 %year-on-year

Recycling Ratio of Industrial Waste at Sites where
Sanki Engineering is the Prime Contractor
FY2022

Consolidated

cases

89.8

%

Down 5.0 %year-on-year

Test and R&D Expenditures

ICT Investment
Consolidated

FY2022

1.50
Up 1.4%
year-on-year

Non-consolidated

kt-CO2Up 40.5 %year-on-year

Number of Registered Patents

458

Consolidated

50.4

kt-CO2As of March 31, 2023

5
70Year-on-Year Comparison of Problems
and Complaints during Construction

Consolidated

Male

61.6%

FY2022

ROA／ROE

46.4
51.8
54.1

Rate of Childcare Leave Taken

Up 1.4 points
year-on-year

%

(FY)

Consolidated

FY20222021 2022 (FY)2020

Rate of Annual Paid Leave Taken

48.2

Average Monthly Overtime Workper Person

Average Age of Managers

billion yen

Non-consolidated

FY2022

1.65

billion yen

Up 17.9 %year-on-year

SANKI REPORT 2023

15

︱

Message from the President ︱Operating Environment Surrounding Sanki and Business Results for Fiscal 2022

Message from the President

Sanki Engineering,
centered on people andtechnology, will be theenduring company ofchoice for society.
Hirokazu Ishida
President

he COVID-19 pandemic, which has had atremendous impact on the global economy overthe past few years, is finally coming to an end, anda gradual recovery is underway in social and economic
activities in Japan. Throughout the pandemic, a cloud of
uncertainty hung over the domestic construction market,
which constitutes a major focus for the Sanki EngineeringGroup. Demand itself, however, remained firm, led bylarge-scale urban redevelopment projects in major cities
and capital investments in semiconductors, automobiles,
and other manufacturing industries, fueling expectations ofcontinually expanding investment in the years ahead.
On the other hand, delays in equipment delivery andthe surging cost of materials and labor have remained a
drag on our profits. Although we have been working hard
to minimize impact through measures such as ordering
materials and equipment well in advance, the situation has
remained difficult to control. Moreover, given that Japan’s
revised Labor Standards Act for capping long working
hours will be enforced in the construction industry from
April 2024, and as construction work carried over from theT▎Business Performance (Billions of Yen)

185.8
168.5

6.8

191.1
170.1

7.4
4.6

2016

217.0
212.3
11.2
9.0

207.6
11.2

previous year continues to accumulate on the back of afavorable flow of orders, appropriately responding to thesedevelopments will be major challenges.
As the above-mentioned circumstances prevailed infiscal 2022, the Sanki Engineering Group secured ample
balance carried forward due to a robust flow of orders forlarge-scale projects in our mainstay Facilities Construction
business. In our Machinery Systems business, there are signsof a recovery in orders received due to demand linked toautomation and labor-saving needs. Although orders fell in
our Environmental Systems business in the wake of receiving
fewer orders for large-scale projects than in the previous
year, there is ongoing demand for construction work arisingfrom the Japanese government’s national resilience policy.
Net sales fell, due in part to delays in some construction
work in the Facilities Construction business and a decreasein construction work carried over from the previous year in
the Machinery Systems business. And while profit tends toimprove with the completion of construction work, fewer
works generating completed sales in fiscal 2022 hobbled any
improvement in profit, causing gross profit to fall.

195.5

202.2

194.0

190.0

7.5

8.1

193.1
9.8

5.9

6.4

3.9
2017
Phase1

2018

2019

2020
Phase2

2021

228.5
190.8

6.2

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

4.7

2022（FY）
Phase3

Status of the Medium-Term Management Plan “Century 2025” Phase 3
he Sanki Engineering Group is currently engaged
in “Century 2025” Phase 3 (FY2022–2025), thefinal phase of the Medium-Term Management
Plan for realizing the long-term vision “Century 2025”
by its 100th anniversary. In Phase 1 (FY2016–2018), we
designated strengthening core businesses, promoting
growth strategies, and enhancing the Sanki brand as
key initiatives under the concept of enhancing quality.
In Phase 2 (FY2019–2021), we added disclosing financial
and capital policies and reinforcing the disseminationof information as key initiatives for enhancing reliability.

T

16

Throughout both phases, we consistently focusedon refining technical skills and human resources toraise the levels of quality and reliability. In Phase 3, we
will endeavor to become the company of choice forour stakeholders by promoting the new initiatives ofcontributing to the sustainability of society, accelerating
work style reforms, and investing toward the next era, in
addition to measures we have been working on to date.
The way we address these three new measures willhold the key to success in Phase 3. First, with regard tocontributing to the sustainability of society, we will focus

SANKI REPORT 2023

17

︱

Message from the President ︱on concrete efforts for realizing carbon neutrality by
2050 based on Sanki’s Carbon Neutral Declaration. Overthe years, we have been cultivating energy conservationand decarbonization technologies through total
engineering as the source of our strength. Initiatives
that effectively apply these technologies to broad areas
including construction and plant facilities are directly
linked to promoting carbon neutrality and therefore
fully aligned with resolving social issues through our
main line of business. As part of these initiatives, in fiscal
2022 we raised the conversion rate for the SANKI YOU
Eco Contribution Point system, promoted Companywide, in which we convert points, based on energysaving solutions offered to customers, into donations
to environmental conservation. We will actively
promote this system along with the development of
new technologies that save energy for customers. We
have also embarked on new capital investments for
decarbonizing our own corporate activities, including
solar power purchase agreement (PPA) projects.
Furthermore, in a notable development over the past
few years, the AEROWING energy-saving air diffuser, ourstrategic water treatment product, has been gaining
recognition overseas, as evidenced by its adoption foruse in large-scale sewage treatment plants in Denmark
and Australia. We will further expand sales of AEROWING
as a core product for overseas business development
to spearhead our efforts toward achieving carbon
neutrality.
Accelerating work style reforms is an urgent issue
for applying the revised Labor Standards Act mentioned
earlier. Sanki Engineering has been taking action toeliminate long working hours through the Smile Project,
and the infrastructure for reforming work styles is now
in place, including the launch of a new operating system
and introduction of new tools at construction sites. We

18

SANKI REPORT 2023

also established a DX Promotion Division in April 2023
and are creating a digital infrastructure that ensuresthat all Group employees are “connected” so we cansteadily and rapidly execute reforms in our operations
and work styles. However, we are aware of the needto analyze our operations once again and implement
thorough measures to achieve our targets. We are
seeking to enhance the quality of our work within
given time constraints, and in that sense, employee
mindsets must also change. Additionally, as we develop
total engineering as the source of Sanki’s strength, thedetermination of which business operations should
remain analog and which parts digitalized will be vital.
Although we have been steadfastly striving to improve
work efficiency and secure human resources, we can only
do so much on our own. The entire construction industry
is struggling to eliminate long working hours, and wewill address the challenge by broadly cooperating acrossthe board, from the facilities sector to customers andconstruction companies.
Finally, we will launch a full-scale effort to invest
toward the next era starting in fiscal 2023. This includes
growth investments to identify and nurture areas thatwill drive future business as well as investments inhuman resources, R&D and ICT, as the foundation forbusiness sustainability, and we plan to invest around20.0 billion yen during the Medium-Term Management
Plan. Meanwhile, in the Facilities Construction business,there is a growing momentum toward using BIM, whichis slated to revolutionize the construction industry. In
response, in July 2022 we acquired a company thatspecializes in creating design and construction drawings,
inputting attribute information, and assisting in creating
drafts using 3D scanners. We fully intend to growtogether as a strategic partner in promoting BIM.
Our business portfolio strategy disclosed in Phase 3
designated facility systems and machinery systems as
growth businesses. To expand our business scope, weare considering collaborating with startup companies in
the Facility Systems business and acquiring companies
that possess elemental technologies to approach
the market for the Machinery Systems business. In
the second half of fiscal 2022, we launched the EarthMIRAI Project to solicit applications from employees to
explore new technologies, and we received more than
100 applications. We will continue to scrutinize theseapplications in order to carefully select and nurture
promising proposals as investment projects that will
open the way to Sanki’s future.

Achieving Sustainable Growth for the Sanki Engineering Groups a total engineering company, the SankiEngineering Group is committed to realizing
its Management Philosophy, “We create
comfortable environments through engineering andwidely contribute to social development.” It also remains
committed to advancing sustainability management byincorporating sustainability into management strategy
decisions to simultaneously realize our own sustainablegrowth while addressing social issues. Today, there is a
growing emphasis on corporate disclosure of information
related to sustainability, and we believe that suchdisclosure also reduces internal and external information
gaps. In our initiatives and disclosures, we will pay due
consideration to public expectations and stakeholder
needs in order to further advance our sustainability
management.
We have been striving to effectively implement the
Sanki Corporate Governance Guidelines throughout
our operations with the conviction that constantly
improving the quality of corporate governance isessential for sustainability management. The diagramof Sanki Engineering’s efforts shows how we willaddress social issues, enhance corporate value over the
medium and long term, and strengthen management
capabilities by addressing key themes in the prevailingAbusiness environment, based on the Sanki Engineering
Corporate Governance Guidelines, which are subject
to ongoing and periodic reviews. At Sanki Engineering,
the effectiveness assessments of the Board of Directors
have been highly successful, and each assessment has
discussed new aspects of implementation, leading toenhanced conversations on sustainability and revitalized
deliberations on the management plan.

Effectivenessassessment ofBoard ofDirectors
Management
plan

Cost of capital

Officerremuneration

Sanki Engineering
Corporate
Governance
Guidelines

Diversity of Boardof Directors

Sustainability

Riskmanagement
Enhanceddissemination of
information

Becoming the Enduring Company of Choice in 2050
became president in April 2020, when the COVID-19
pandemic was in full swing, and over the past
three years I have experienced the challenges ofcommunicating with each other. We are engaged in a wide
range of businesses backed by a diverse array of elemental
technologies, which tends to erect high barriers between
divisions and give rise to the danger of sectionalism.
I believe that my role as top manager is to maintainthe connections among decisions and bring everyone
together as colleagues in the same Group moving forwardin the same direction. In fiscal 2022, for the first timesince assuming office, I was able to hold CCU* discussion
events as president, and toured business bases across thecountry to exchange opinions with many executives andemployees. I realized anew the importance of listening
directly to the voices of employees and conveying theCompany’s direction in my own words. At the same time, I
was able to sense the immense potential of our Group.

I

With the milestone of our 100th anniversary in 2025,
we will fulfill our mission as a total engineering company
by devoting our management resources to actions that
address the materiality of the Sanki Engineering Group.
While all of the items identified as our materiality are vital,
I believe that technology represents our competitive edge
and that our people are the prerequisite for the survivalof our business. To ensure that our total engineering
contributes to society and leads us into the future, we must
reaffirm our commitment to being a technology-centeredcompany, devote ourselves to pursuing happiness forcolleagues, including our subcontractors, and overcome thefast-approaching challenge of the revised Labor Standards
Act. By moving beyond this challenge, we will achievesustainable growth and the trust of our stakeholders torealize our ultra-long-term vision of becoming “Sanki, The
Enduring Company of Choice” by 2050.

*President’s CCU (Century Communication Up): Discussion events named after the long-term vision“Century 2025,”in which the president andemployees engage in a direct exchanges of views.

SANKI REPORT 2023

19

︱

Sanki Engineering’s Future Vision and 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 bycreating value at each step of the business process and in every business area.

Climate change

DX and cyber risks

Resource and energy
constraints
Human rights risks

Stakeholder
Needs

Decarbonization

Disaster prevention, mitigation, and resilience

Declining population,
falling birthrates, and aging
population

Sustainable use of resources

Automation, labor-saving, and higher productivity

Safe working environments

Infrastructure maintenance and upgrades

Creation of comfortableenvironments

Aging infrastructure

Work style reform

Adaptation to the new normal during the COVID-19 pandemic

A better, sustainable society

Continuous Enhancement of Corporate Value  
OutputOutcome

Capital Assets

Major Products and Services

Value Created(FY2022)(FY2022)(FY2022)

Input

Business Activities

Planning and
DesignFinancial Capital• Growth investment

18 locations• Comprehensive training and research facility(Sanki Techno Center)

Intellectual Capital• Proven track record and advanced technicalskills across a broad range of businesses• Average training
cost per capita

15

Manufactured Capital• Reduction rate for number of problems andcomplaints during construction• Rate of paid leave taken per person

859“Century 2025”
Phase1

Phase2Medium-Term
Management Plan Phase 3
Company of Choice

P. 24
Contribute to acarbon-free society

22,793MWh
44.1thousand m

3*1

Pursuit of happinessfor colleagues

Use engineering tobuild a comfortableenvironment

Stable earnings and stronger business base*5

1,225 persons
2.5 %
1.2 %
27.4 hours
61.6 %Create newsocial value• Closer cooperation with subcontractors through subcontractor groups• GHG emissions
Scope 1 and 2• Industrial
waste

Sanki Engineering Group Material Issues• Input of energy and water resources

Environmental Impact

Scope 3

• Collaboration with startup companies• Consideration for the environment

91.6 %

Social and Relationship Capital

P. 26

P. 08

Natural Capital

458 cases

Incinerator at SU Kaihatsu

Ultra-long-term vision “Vision for 2050”• Value creation through open innovation*4

Human Capital• Employee satisfaction(non-consolidated, FY2021 survey)• Project management technician  (civil works, construction, electrical construction,pipe laying works)• Ratio of women in managerial positions(non-consolidated, as of April 1, 2023)• Ratio of non-Japanese employees(non-consolidated, as of April 1, 2023)• Average monthly overtime work per person

Long-Term Vision

25% reduction
from FY2021
0.58

Intellectual Capital• Number of registered patents(as of March 31, 2023)

Yamagata Prefectural Shinjo Hospital• Collaboration with business partners

SANKI REPORT 2023

• Equity ratio

5.1 %75 yen52.6 %*2

Construction

Social and Relationship Capital20• Annual dividends per share

55,000 yen/year• Credit-worthiness fostered over the years and asolid customer base• Members ofcompanies
subcontractor groups

Water use

190.8 billion yen

2,627• Skill development for Group companies andsubcontractors

Energy use• Net sales• Industrial accidents frequency rate

Facility
Systems
Business,

Human Capital• Number of
employees

Environmental
Systems
Business• ROE

Major Projects

Sanki
Engineering GroupManagement
Philosophy

e nt

1.50 billion yen

228.5 billion yen

Procurement• Yamato Product Center• Orders received• Large-scaleconstruction projects

Facilities
Construction
Business

Financial Capital

Our Value Creation Process

in

e rat
ion and M anagem
an d I n s p e c t i o n• Domestic bases (branches
and branch offices)

Machinery
Systems
BusinessOp

Manufactured Capital• Test and R&D
expenditures ofMajor Products and Services

90.9 billion yen
3.2 billion yen• Net assets

Sanki Engineering’s Future Vision and Value Creation

SocialIssues• Exchange views with business partners

5.34 kt-CO

2

3.93 million t-CO223.0 kt*3*1 Eight sites including the Sanki Techno Center, Yamato Product Center, Nasu
Techno Station, and field offices*2 Construction projects of over 1 billion yen each
*3 Sites where Sanki Engineering is the Prime Contractor and domestic Group
companies*4 Sanki Engineering construction sites (Sanki Engineering Co., Ltd. and business
partners)*5 Ratio of employees who selected the response, “I want to continue working in
the Sanki Engineering Group.”• Implementation and participation in open
innovation

26 companies
32 projects

Natural Capital• Contribution to CO2 reduction based on our
proposals (for ordered projects)• Reduced environmental impact throughpromotion of major energy creation initiatives

50.4 kt-CO
5.21 kt-CO
0.27 billion m2

2• Volume of water treated using Sanki Engineering
products• Provision of facilities equipped with highly efficient energy saving
facilities based on ZEB

3

SANKI REPORT 2023

21

︱Sanki Engineering’s Future Vision and Value Creation ︱Management Resources of the Sanki Engineering GroupThe capital accumulated by the Sanki Engineering Group over nearly a century supports our daily business
operations and represents the wellspring for our next stage of growth. We will continue to enhance our management
resources while improving the quality of our total engineering capabilities, the greatest value offered by the SankiEngineering Group, to ensure our own sustainable growth.

• Secure and foster diverse and highly skilled human resources, who will lead our business in the
future, as part of Phase 3 of the Medium-Term Management Plan, which focuses on enhancing
the Company’s quality and reliability toward becoming the company of choice.
• Provide career development and classroom training for qualification acquisition, as well aspractical technical and safety training with actual equipment, at the Sanki Techno Center, ourcomprehensive training and research facility.
• Provide training and offer the use of research facilities for subcontractors who work with us to
support on-site construction operations.
• Maintain efforts for creating working environments that enable each individual employee towork with vigor and pursue self-directed career development by fully demonstrating theircapabilities, including accelerating work style reforms by developing systems for supportingsite operations and DX, offering a rewarding personnel system, and establishing programs forbalancing personal life and work.
Related Policies and Measures under the
Medium-Term Management Plan Phase 3

Ratio of employees by job classification

Related Policies• Smile Work Guideline

Other (management
support and otherjobs)

M easures under the Medium-Term
Management Plan Phase 3• Strengthen core businesses• Accelerate work style reforms• Invest toward the next era

22 %
16 %

50 %

R&D and design

12 %Human resource investment(FY2022)

Approx.

Intellectual
CapitalProjectmanagement andmanufacturing

As of March 31,
2023

Sales

We receive orders for various types of
construction work based on the trust we havecultivated over the years with a diverse rangeof customers throughout Japan, including
building owners, developers, manufacturers,
and government agencies, and we carry out
construction work in cooperation with ourbusiness partners, including construction
companies and subcontractors.

By maximizing the use of elemental
technologies involving air, water, heat,electricity, machinery, and information, we
contribute to meeting customer needs aswell as to the resolution of diverse issues
faced by society.

Project management technician (civil works,
construction, electrical construction, pipe laying works)

23.1

1,225

billion yen

persons(Consolidated, as of April 1, 2023)

Natural Capital

Manufactured
CapitalThe Sanki Engineering Group maintains
locations in Japan and overseas that serveas base camps for promoting businessand cultivating human resources.

22

SANKI REPORT 2023

• We have operations throughout Japan, and in Asia and Europe. Our 18 domestic branch andbranch offices, as well as our five domestic and three overseas consolidated Group companies,
also serve as base camps for human resource development to support on-the-job training atconstruction sites.
• We regard the Sanki Techno Center, which houses the R&D Center, as our “temple of learning”
for passing down and developing technical skills.
• The Yamato Product Center, the main production base for conveyors, functions as a site for
improving quality, productivity, and development capabilities.
Related Policies and Measures under the
Medium-Term Management Plan Phase 3
Measures under the MediumTerm Management Plan Phase 3• Strengthen core businesses• Promote growth strategies• Accelerate work style reforms• Invest toward the next era

Capital investment(FY2022)450

million yen

The Sanki Engineering Group contributes
to the creation of a decarbonizedsociety by installing energy-saving andenergy-creating equipment in buildings,
factories, stores, hospitals,
and infrastructure facilities.

ICT investment(FY2022)

1.65

billion yen• Maintain and strengthen the customer base cultivated over the years, including financial
institutions, electronics manufacturers, and automobile manufacturers.
• To strengthen the construction system, establish a certification and commendation programs aswell as regular meetings and training opportunities to maintain and strengthen relationships oftrust with members of subcontractor groups throughout Japan that support on-site construction
operations.
• Improve payment terms to safeguard a stable business environment for our business partners.
• Actively communicate with governments and other relevant stakeholders in each region inwhich we operate, and conduct a variety of social contribution activities that benefit regional
development.
Related Policies and Measures under
the Medium-Term Management Plan Phase 3
Related Policies• S anki EngineeringGroup Procurement
PolicyMembers of
Subcontractor groups easures under the Medium-Term
M
Management Plan Phase 3• Enhance the Sanki brand• Contribute to the sustainability of society859

companies• The R&D Center takes the lead in collaborating with business units to pursue new technologies,
improve and enhance the functionality of proprietary technologies, conduct basic research, andinvestigate new technologies.
• Develop solutions that meet the most advanced needs based on the elemental technologies of
total engineering encompassing design, construction, and maintenance in diverse fields, andcombine them with the latest IoT and AI technologies while also utilizing open innovation.
 roperly manage and operate intellectual property generated through R&D after compiling a•P
database, including patent summaries and gazettes. Regular internal information sharing andeducation and training on patents and the like actively promote the utilization and protectionof intellectual property.
Related Policies and Measures under
the Medium-Term Management Plan Phase 3

R&D Expenditures(FY2022)1.5

 easures under the Medium-Term Management Plan Phase 3
M• S trengthen core businesses • A ccelerate work style reforms• I nvest toward the next era

billion yen• Develop environmentally sound products and construction methods.
• Engage in environmental conservation activities by promoting the SANKI YOU Eco Contribution
Point system.
• Quantitatively assess the environmental impact of electricity, and fuel and other energy and water
resources used in the Group’s business activities, as well as CO2 emissions and waste, and takesteps to improve them, as part of our role in conserving the global environment.
• Promote initiatives to reduce our own environmental impact, including the use of renewableenergy.
• Dispatch personnel to the Antarctic Research Expedition for preserving biodiversity in the
Antarctic region by maintaining and managing wastewater treatment and HVAC facilities.
Related Policies and Measures under
the Medium-Term Management Plan Phase 3
Related Policies• S anki EngineeringGroup Environmental
Policy• S ustainability Policy• S anki’s Carbon Neutral
Declaration

 easures under the MediumM
Term Management Plan
Phase 3
• Contribute to thesustainability of society• I nvest toward the next era

Management Resources of the Sanki Engineering GroupThe Sanki Engineering Group has been
pioneering in each era through thepower of technology and considers its
people, who possess that technology, tobe its greatest asset and the source of its
business competitiveness and corporate
value. By steadfastly investing in humancapital, we strive to create working
environments for a more effective
development and use of our humanresources.

Social and
Relationship
CapitalStatus of the Medium-Term Management
Plan “Century 2025” Phase 3 (FY2022–2025)

Sanki Engineering’s Future Vision and Value Creation

Human Capital

PP. 26–28

CO 2 emissions by Scope(Consolidated, FY2022)

5.34
3.93

Scope 1 and 2
Scope 3

kt-CO2

million t-CO2

For more information on financial capital, see: “Message from the Chief Financial Officer”

P. 29

Message from the Chief Financial Officer

SANKI REPORT 2023

23

︱Sanki Engineering’s Future Vision and Value Creation ︱Sanki Engineering Group Materiality
The Sanki Engineering Group identified its five key issues of materiality in February 2022, based on an assessmentof issues selected from a broad perspective in terms of “improving environmental and social value” and “improving
corporate value.” By strategically allocating management resources to measures corresponding to the five issues, we
aim to realize a resilient management foundation and sustainable society.

Imp
rov
ee
nvi
ron
me
nta
l an
d so
cia
l va
lue

High

Our Contributions to Sustainability

Contribute toa carbon-free society
Use engineering tobuild a comfortableenvironment

Stable earnings
and stronger
business basePursuit of happinessfor colleagues
Createnew social value

Materiality

High

https://www.sanki.co.jp/en/csr/materiality/

Improve corporate value

Initiatives

Contribute to acarbon-free society

We will contribute to realizing carbon neutrality by applying the energy
conservation and energy creation technologies we have cultivated to diverse
fields in facilities construction, and plants and machinery systems.
• Promote decarbonization• Promote the renewable energy power generation business• Expand the decarbonization-related market

Pursuit of happinessfor colleagues

We will aim to achieve sustainable growth by creating an environment in which
our human resources, our invaluable assets and fellow workers, can pursue
happiness through their work.
• Improve human resource development and technology• Promote work style reforms• Respect human rights• Promote diversity

Use engineering tobuild a comfortableenvironment

We will contribute to constructing a diverse array of comfortable environmentsthat support society by developing comprehensive engineering capabilities
that integrate our component technologies across the Group.
• Build strong social infrastructure• Diversify the water treatment business

Create new socialvalue

We will rise to the challenge of creating new social value by mobilizing all our
technologies and knowledge in a continuous effort to take the initiative inmeeting the changing needs of society.
• Promote activities that contribute to society• Expand the automation and labor-saving market• Expand consulting services

Stable earnings
and stronger
business baseWe will strive to build a resilient and flexible management base that generates
stable earnings to remain a company that meets the needs of society andcontributes to its sound development for years to come.
• Strengthen the governance system• Increase productivity• Enforce thorough compliance• Promote DX• Promote occupational safety and health • Secure stable long-term business• Improve quality• Provide returns to stakeholders

Relevant SDGs

Sanki Engineering Group Materiality

Materiality (Key Issues)

Materiality Identification Process, Advancement, and Review
STEP 1
Identify issues

STEP 2
Prioritize andvalidate

STEP 3
Final review andapproval

Evaluate business activities and their impact based on the following considerations, and identify 34 issues◦Value chain status, risks and opportunities, long-term vision, and strategy of the Group’s business activities◦International guidelines, external conditions encompassing economic, social, and environmental factors,
and social demands◦Evaluate and prioritize the issues identified on the two axes of improving corporate value and improving
environmental and social value and designate them as the five material issues◦Examine whether issues important to the Group have been addressed and whether stakeholder
expectations have been reflected, then finalize◦Confirmation and review by each department◦Review and approval by the Sustainability Committee◦Deliberation and decision by the Board of Directors

Guidelines and other references cited in STEP 1(In-house) Long-term vision, business strategy, management plan, exchange of opinions with officers and departments, in-house surveys(External) ISO 26000, SDGs, GRI standards, SASB standards, examination and evaluation of ESG (DJSI, etc.), integrated report survey, opinions and advice
from outside experts and advisers, The Global Risk Report

Advancement◦Incorporated materiality into the Medium-Term Management Plan and set KGI and KPI targets◦Held a progress review by the Sustainability Committee and submitted a report to the Board of Directors◦Conducted a survey on materiality (key issues)- Survey was conducted in April 2023 for all Group employees to disseminate understanding of materiality and gather feedback- Results were published internally and incorporated into sustainability measures

Review◦Conducted a review to confirm the necessity of upgrading our materiality- Progress in activities, revisions* to the GRI Standards 2021, revisions to regulations such as Japan’s Cabinet Office
Ordinance on Disclosure of Corporate Affairs, etc., and global sustainability trends*Particularly those areas in which an organization has the most significant impact on people (including economic, environmental,
and human rights)

P. 27

Sanki Engineering’s Future Vision and Value Creation

Materiality Identified

New Measures for Phase 3

P. 44

Sanki Engineering Group Value Chain

Stakeholder Engagement

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

Initiatives for energy conservation and energy creation aimed at decarbonization are also directly linked to the Sanki EngineeringGroup’s core business as a total engineering company. Accordingly, we have positioned “Contributing to a DecarbonizedSociety” as a top priority among the material issues identified. We have established interim and long-term targets to achievecarbon neutrality by 2050.

https://www.sanki.co.jp/en/csr/governance/engagement/

24

SANKI REPORT 2023

SANKI REPORT 2023

25

︱Growth Strategies and Sustainability Management ︱Status of the Medium-Term Management Plan“Century 2025” Phase 3 (FY2022–2025)

FY2022 Results

Difference

Net sales

220.0 billion yen

190.8 billion yen­­­­–29.2 billion yen

Gross profit(ratio)36.0 billion yen (16.5%)

27.0 billion yen(14.2%)–9.0 billion yen(-2.3 pt)

Ordinary profit(margin)12.0 billion yen (5.5%)

6.2 billion yen(3.3%)–5.8 billion yen(-2.2 pt)

FY2022 Results

Ordinary profit
margin

5.0% or higher

3.3%

Dividend policy

Dividend payout ratioof 50% or more
Annual dividend per shareof 70 yen or more

Dividend payout ratio of 87.4%
Annual dividend per share of 75 yen

Acquisition oftreasury stock

About 5 million shares*

1.5 million shares (cumulative total of
1.5 million shares during the plan period)

8.0% or higher

5.1%

About 20.0 billion yen*

3.2 billion yen *Cumulative(cumulativetotal
totalduringof 3.2 thebillionplanyenperiodduring the plan period)

Enhance
Reliability

Promote Growth Strategies
Pursue future growth in the areas oftechnology and business

Enhance the Sanki Brand
Develop human resources thatpossess the Sanki spirit

FY

2016—2018• Improve construction productivity• Meet energy-saving and laborreduction needs• Promote technological research anddevelopment• Continue to receive orders for stock
projects• Create better work conditions• Improve internal communication

Disclose Financial andCapital Policies
Strengthen Information
Dissemination Capabilities

FY

2019—2021

Maturity and Evolution of Measures toEnhance Quality and Reliability

Further Pursue Quality

Refining Technical Skills andHuman Resources to Enhance Quality

Strengthen Core Businesses
Improve component technologies
and achieve stable growth

1 Strengthen Core Businesses

Measure2 Promote Growth Strategy

� Delivered an AI waste crane system to CleanHill Tenzan

Received many orders for large-scale urban redevelopment
projects and life cycle engineering* projects to build a legacy forthe future in semiconductor- and automobile-related fields*Sanki’s concept to target the entire life cycle of buildings

Facility Systems Business
Developing new services aimed at expanding capacity incollaboration with a startup company

Plants & Machinery Systems Business
Machinery Systems Business

Environmental Systems Business

Developed and launched new
products targeting the logistics
market.

The AEROWING aeration system
for water treatment facilities is wellreceived worldwide.

Measures Carried Over from Phase 2

�P articipated in the Ministry of the Environment FY2022

Decarbonized Resource Recycling Business Demonstration
Project Utilizing Digital Technology�R eceived orders for energy-saving aeration systems for a largescale water treatment facility in Australia
�S elected for the Ministry of Land, Infrastructure, Transport andTourism FY2022 Breakthrough by Dynamic Approach in Sewage
High Technology Project FS**Feasibility study
Measure3 Enhance the Sanki Brand

�Continued to support environmental conservation in Antarctica� Launched the Earth MIRAI Project to explore new technologies
� Continued to support the Earthquake Recovery Project

Maturity and Evolution of Measures toEnhance Reliability

We will focus on further raising awareness of Sanki Engineering measures under Phase 2 to broaden the understandingof our stakeholders.
MeasureFinancial and
1 Disclose
Capital Policies

� P rovided stable and sustainable returns for

MeasureInformation
2 Strengthen
Dissemination Capabilities� I mplemented bus-wrap advertising

stakeholders

Becoming even more the companyof choice for stakeholders

3

Phase
Company of ChoiceLong-Term
Vision“Century 2025”*Cumulative total during the plan period

Phase 2

Enhance Quality

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

New Measures from Phase 3

Enhance the Company’s Quality
and Reliability

Contribute to the Sustainabilityof Society

In Phase 3, which will mark the culmination of our long-term vision, we are implementing new measures for achieving
sustainable future growth.

Accelerate Work Style Reforms

MeasureInvest toward the Next Era

FY2022—2025

1 Contribute to the Sustainability of Society

�Strengthened the SANKI YOU Eco Contribution Point System
�Began supplying electricity sourced from renewable energy (solar power) for

the Sanki Techno Center and Yamato Product Center� Certified by CDP as an A List company
� Joined the Ministry of the Environment 30by30 Alliance for Biodiversity
� Established and disclosed the Sanki Engineering Group Human Rights Policy
Measure2 Accelerate Work Style Reforms

�Introduced a new personnel system, extending the retirement age to 65, actively

promoting young employees, and raising starting salaries

Measure3 Invest toward the Next Era

�Invested 3.2 billion yen out of the total four-year

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

Phase 3 Targets
FY2022–FY2025

Phase 1Maturity and Evolution of Measures toEnhance Quality

Facilities Construction Business

Phase 3 Targets
by FY2025

Growthinvestment

Measures Carried Over from Phase 1

MeasurePhase 3 Targets and First-Year Results

ROE

Status of Key Initiatives
Growth Strategies and Sustainability Management

Fiscal 2022 marked the start of the Medium-Term Management Plan “Century 2025” Phase 3 (FY2022–2025).
In this phase, we are working to achieve maturity and evolution for the Key Initiatives we have been implementing inPhases 1 and 2, while adding and promoting new measures for enhancing the Company’s quality and reliability.
Here we report on the status of Sanki Engineering’s initiatives as we strive ever harder to become the company ofchoice, the goal of our long-term vision.

investment budget of 20.0 billion yen.
�Engaged in M&A to promote BIM
�Decided on the construction of a clean room inside

the Yamato Product Center to develop clean room
products
�Positioned human capital investment, ICT investment,
and R&D investment as investment toward the future�Made capital investments for decarbonization basedon Sanki’s carbon-neutral declaration

�Launched the new Career Return Program
�Renewed Company uniforms to create more comfortable working environments*The ESG Policy in Phase 2 has evolved into the Sustainability Policy in Phase 3.

26

SANKI REPORT 2023

SANKI REPORT 2023

27

︱Growth Strategies and Sustainability Management ︱ Status of the Medium-Term Management Plan “Century 2025” Phase 3 (FY2022–2025)

Materiality and KPIs for Phase 3 (FY2022–2025)
Materiality

Contribute toa carbon-freesociety

Create newsocial value• Scope 1, 2 emissions: 40% reduction from FY2020 levels*• Scope 1, 2 emissions: 5.34kt-CO ₂ (34% reduction from FY2020 levels)• Scope 3 emissions: 10% reduction from FY2020 levels*• Scope 3 emissions: 3.93Mt-CO ₂ (36% reduction from FY2020 levels)

Now that we are able to secure profits consistently,• Reduce CO₂ emissions based on the SANKI YOU Eco Point system by anadditional 30% compared to the three-year average from FY2018 to FY2020*• 97% increase compared to the three-year average from FY2018 to FY2020

we will invest in growth toward the next era.

• Rate of childcare leave taken: male 50%, female 100%•M ale 10.7% (44.6% by including Sanki Engineering’s own leave program),
female 100%

• Raise the ratio of women in managerial positions to 3.0% by April 2026

• 2.5% (as of April 2023)

Promotion of younger employees• Average age of managers (reduce by one year from average age levels as ofApril 2022 by April 2026): Manager 45.8, General Manager 50.2,
Executive Manager 53.5

•A
 verage age of managers (as of April 2023): Manager 46.4,
General Manager 51.8, Executive manager 54.1

• Monitoring based on employee satisfaction survey: maintain at least
a 90% ratio of respondents who wish to continue working at the SankiEngineering Group• Survey not conducted (FY2021 response ratio: 91.6%)• Respond to Japan’s revised Labor Standards Act in 2024

• Average additional work hours
Construction work: 42.2 hours per person (3.9% decrease from FY2021),
other work: 17.4 hours per person (3.9% decrease from FY2021)• Average number of paid leaves taken
Construction work: 10.6 days per person (8.2% increase from FY2021),
other work: 13.2 days per person (11.8% increase from FY2021)• A ttendance at corporate ethics training including human rights
issues: 100%*• Attendance at corporate ethics training: 99%• Implementation (market launch) of open innovation based researchoutcome : 5 projects• J oint research with universities and research institutions: 13 projects• Collaborative projects with private and venture enterprises: 19• Decide on a research field to be explored under the Earth MIRAI Project:
20 projects to be conducted in 4 years*• E mployee research applications: 122 projects (132 themes)

Contribute to society by supporting sports and the arts
• Sports: maintain 4 programs per year• Arts: maintain 2 programs per year• Support for cultural activities: maintain 1 program per year

• S ports: 10 programs• A rts: 2 programs• S upport for cultural activities: 1 program• Number of serious accidents: 0• Incidents involving suspension of production: 0• I mplement root-case analysis of problems and complaints within five
years following the completion of construction work: 100%
• Report on root-cause analysis: 4 times per year

• Number of serious accidents: 0• Incidents involving suspension of production: 0• P roblems and complaints within five years following the completion of
construction work: 42, of which root-case analysis implemented: 71%(12 continuations out of 30 incidents)• R eport on results of root-cause analysis made to the Quality Risk
Committee: 4 times per year• I mplement preventive measures to achieve zero accidents involving
suspension of operations• Creation of safety education materials reflecting accident tendencies: atleast 2 sets of materials each in the east and west regional blocks per year• Hold exchange between the east and west regional blocks: at least 2
times a year

• A ccidents involving suspension of operations: 5• Creation of safety education materials: 2 sets of materials each for east
and west regional blocks• Cross-patrols between east and west regional blocks: 2 occasions• S afety education conducted for staff of subcontractors and supporting
staff: 100%

• S afety education conducted for staff of subcontractors and supporting
staff: 100%

• Develop digital and robotic technologies related to construction: 5
projects per year• Actual cases of application of developed technology: 5 projects per year

• F Y2022 development themes: 6 projects•A ctual application of developed technology: 2 projects

Facilities
Construction
Business

Stable earnings and stronger business base

Facility
Systems
Business
Machinery
Systems
Business
Environmental
Systems
Business• Large-scale projects based on business headquarters system: 5• L arge-scale projects based on business headquarters system: 3• Orders received for consulting/facility engineering: 400 million yen• Orders received for consulting/facility engineering: 140 million yen• O rders received for projects related to NeWSICT (Next Work Style with
ICT): 500 million yen• Orders received for projects related to NeWSICT: 160 million yen• O rders received for project management and construction work
resulting from consulting and other sales approaches: 2.1 billion yen• Orders received for project management and construction work resulting
from consulting and other sales approaches: 1.08 billion yen• Net sales of robot systems: 5.0 billion yen (cumulative)• P roposals for facilities using robots: 14• N et sales of robot systems: 550 million yen• Orders received (cumulative): AEROWING: 3.6 billion yen, G3 decanter
centrifuge: 2.0 billion yen, fluidized bed incinerator: 2 units• O rders received (cumulative): AEROWING: 800 million yen, G3 decanter
centrifuge: 1 unit, fluidized bed incinerator: 0 units• AQUACONSULT: net sales of 1.2 billion yen• N et sales: 1.37 billion yen

Raise labor productivity based on DX, Smile Plan, and other initiatives• A nnual work hours per person: 2,015 per year (reduction of 19 hours,• Annual work hours per person (hours per person per year): 1,951 (FY2025)
down 0.93% year on year)

Other• Investments for the next era (decarbonization technology, automationand labor-saving technologies, LCE business, DX): 20.0 billion yen*

• Total: 3.2 billion yen• Payout ratio: 50% or more*• Payout ratio: 87.4%• Annual dividend per share: 70 yen or more*• Annual dividend per share: 75 yen• A cquisition of treasury stock over the term of Phase 3: about 5,000,000
shares*• Acquired 1,500,000 shares• ROE: 8.0% or more*• ROE: 5.1%

Yoshio Kawabe

Director, Managing Executive Officer, General Managerof the Accounting Division, and Chief Financial Officer

Providing Stable and Continuous Returns toShareholders
Phase 3 of the Medium-Term Management Plan “Century
2025” was launched in fiscal 2022, and we have returned
profits to shareholders and invested in growth in linewith our new management targets. Fully aware that theongoing implementation of these measures will dependon posting stable profits, we will work to secure higher
profit margins by collaborating with each businessdepartment with due consideration to risks such as therecent surge in raw material prices.
With regard to our capital policy, providing stable
and continuous returns to stakeholders will remain a key
mission in fiscal 2023. While shareholder returns will still becentered on dividends, we will also systematically acquireand cancel treasury stocks by keeping an eye on the statusof profits and dividends. Additionally, we will constantly
seek to improve payment terms for our business partners.
In Phase 3, we set our ROE at 8.0%. In addition to
paying stable dividends and acquiring treasury stocks,
we will review our cross-shareholdings to improve theefficiency of our cost of capital. Gross profit is the mostimportant indicator for increasing our return on capital,
and in Phase 3, investments in growth will be made tofurther increase profit. Although our Price Book-value
Ratio is currently below 1x, these measures will be firmly
implemented and information will be actively disseminatedto raise public recognition of Sanki Engineering andimprove our stock price.

Extending Current Investments into Future
Growth Drivers
As our efforts to enhance the Company’s quality and reliability
in Phases 1 and 2 have enabled us to consistently secure profits,
I believe that now is the right time to actively invest for the
next era. Specifically, we have set aside a total of 20 billion yen
for growth investment during Phase 3. Of this amount, in fiscal
2022, we invested 3.2 billion yen in growth, including the M&A
of a company with expertise in BIM. Looking ahead, we will
introduce solar power generation at Sanki Engineering Group
companies toward achieving carbon neutrality and promotecollaboration with startup companies in the Facility Systems
Business, which we have positioned as a growth business.

As for cash flow, despite fluctuations due to property
sales, we have secured adequate working capital. We also
have sufficient equity capital and are in position to provide
stable returns to shareholders. With due consideration forachieving the optimal capital structure, we will proceed
to implement our 20 billion yen investment and apply
leverage, depending on the nature of specific investments.

Simultaneously Improving Corporate, Social,
and Environmental Value
Our most important management resource is our humanresources. Investment in human resources is essential for
extending our business beyond the technology and expertise
we have gained so far and achieving further development.

From the perspective of sharpening our competitive edge,
social investment is just as important as diligently working toachieve our performance targets for Phase 3. Given that SankiEngineering’s business is directly linked to decarbonizationand conservation of the global environment, we havedeclared that our mission is to improve corporate value
while also improving environmental and social value at thesame time. We will strive to achieve sustainable corporate
growth so as not to betray the stakeholder trust we havebuilt up over the years.

Message from the Chief Financial Officer

Use engineering
to build acomfortableenvironment

FY2022 Results

Growth Strategies and Sustainability Management

Pursuit ofhappiness forcolleagues

KPIs for Phase 3 (FY2022–2025)

Message fromthe Chief Financial Officer

Investments for the
Next Era❶ ICT investment❷ H uman capital
investment❸ R&D investment❹ M&A investment

FY2022
Invest a total of
3.2 billion yen out of the
20.0 billion yen growthinvestment budget for
the Phase 3 period❺ Capital investment

Note: KPIs with an asterisk are for the Sanki Engineering Group, while all others are non-consolidated.

28

SANKI REPORT 2023

SANKI REPORT 2023

29

︱Growth Strategies and Sustainability Management ︱1

FeatureSanki Engineering Group’s Initiatives forAchieving Carbon Neutrality by 2050

Manufactured
CapitalNatural Capital

Reduction target for Scope 3 emissions
TargetReduction measures•E xpand business using energy
conservation and energy creation
technologies•Boost promotion of the SANKI YOU
Eco Contribution Point system-10%
TargetNet zero

2020

2025

Scope 3

1. Rawmaterials

4. Transportationand distribution

Scope 1

Scope 3

Scope 2

7. Employee
commutingCombustionof fuels

Others: 2. Capital goods, 3. Fuel- and energy-related
activities not included in Scope 1 or 2, 5. Waste generated inoperations, 6. Business travel, 8. Leased assets

Downstream

Electricity
use

12. End-of-life
11. Use of soldtreatment of soldproducts
products

Others:9. Transportationand distribution,
10. Processing ofsold products,
13. Leased assets,
14. Franchises,
15. Investments

Sanki Techno Center

FY2022 Reductions in CO2 emissions(Scopes 1, 2)

2.72

kt-CO

2
(down 34% from FY2020)

Bolstering the SANKI YOU Eco Contribution Point System

In fiscal 2022, we bolstered the SANKI YOU Eco Contribution Point system, which converts
the reductions in CO2 emissions that customers achieve by adopting our energy-saving
proposals into points that are used to support environmental conservation activities. We
plan to raise the point conversion rate from 100 yen per ton of CO2 reductions to 200 yen
per ton to expand support for environmental conservation activities.
We subsequently entered into partnerships in March 2023 with Wakayama
Prefecture and Shirahama Town as well as Ritto City in Shiga Prefecture, as newrecipients of support. The respective projects were named SANKI YOU Forest NankiShirahama and SANKI YOU Forest Lake Biwa Konze, and we will work to establish forests
for future generations by cultivating relationships with local communities through treeplanting and other activities with the participation of Sanki Engineering employees.

Feature 1

Own Emissions(Sanki Engineering Group)

Initiatives for Reducing In-house Energy Useby the Sanki Engineering GroupIn fiscal 2021, we embarked on a full-scale effort to reduce our in-house energy use
toward attaining our 2030 interim goal of achieving carbon neutrality in terms of the
Sanki Engineering Group’s GHG emissions.
In April 2022, we signed a power purchase agreement (PPA) for the Sanki Techno Centerand Sanki Yamato Building, both assets owned by the Company, to switch to electricity
sourced from net-100% renewable energy. We also completed the agreements for theconversion to 100% renewable energy-sourced electricity for our Kansai Branch in Septemberof the same year, and for St. Luke’s Tower, where our head office is located, in April 2023.
We are also steadily replacing heat source and other equipment at the Sanki Techno
Center and Sanki Yamato Building with energy-saving models. Furthermore, we will
accelerate our efforts to decarbonize our operations through such measures as thesolar power generation PPA project, which will be implemented across the Yamato Site,
including the above facilities, in February 2024.

Scope 32050

Sanki Engineering Group’s GHG Emissions*

Upstream

Scope 1, 2

Growth Strategies and Sustainability Management

The Sanki Engineering Group has positioned contributing to a carbon-free society as one of its materiality (key issues) and iscommitted to achieving carbon neutrality by 2050. Given that climate change is directly connected to our business as a total
engineering company, we are working to reduce CO2 emissions in all areas of our business operations, including our supply
chain, while also promoting energy conservation and energy creation proposals to our customers. To further accelerate ourefforts, we are bolstering our SANKI YOU Eco Contribution Point system, which converts the reductions in CO2 emissions
that customers have achieved based on our proposals into points as a means of supporting environmental conservation
activities. These initiatives will expand the scope of carbon neutrality.

Signing ceremony at the Wakayama Prefectural
Government office

Emissions from In-house Activities
Scope 1

Scope 2

Target2025-40%

Reduction targets for Scope 1 and 2 emissions
Reduction measures•I ntroduce electricity sourced fromrenewable energy•I nstall solar power generation and otherfacilities
2020

TargetNet zero
2025

2050

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

2020

Scope 1, 2CO2 emissions
Scope 3CO2 emissions
Reduced CO 2
emissions by the
SANKI YOU EcoContribution
Point system

-40 %
-10 %
+30%

2030

2050

Sanki Engineering Group’s
GHG emissions
Carbon neutrality

Toward Carbon
Neutrality

Scope 1, 2

Scope 1, 2, 3

Signing ceremony at the Shinrin Taiken Kouryu
Center, Ritto City

2022
Thoroughly implement energy conservation activities and invest in decarbonization facilities

Scope 1, 2
Reduction measures

Convert to electricity options sourced from renewable energy at in-house facilities, maintain private power

generation facilities (including Power Purchase Agreement (PPA) projects)

Convert to electricity options sourced from renewable energy at each business site
Promote decarbonization of construction sites
Purchase carbon credits

30

Scope 3

Promote development of decarbonization technology

Reduction measures

Promote the SANKI YOU Eco Contribution Point system

SANKI REPORT 2023

SANKI YOU Eco Contribution Point System
Now in its 12th year, the Sanki Engineering Group’s
SANKI YOU Eco Contribution Point system contributes,
along with our partners, to preventing global warming
and realizing a sustainable society. We will continue topromote CO2 reductions through the system toward
our fiscal 2025 goal of reducing CO2 emissions by atleast 30% compared to the three-year average fromfiscal 2018 to fiscal 2020.

SANKI REPORT 2023

31

︱

Growth Strategies and Sustainability Management ︱2

Feature︱Sanki Engineering Group’s
DX Strategy

Key Initiative1

Key Initiative

Business Process Reform

Manufactured
CapitalSatoru Shimizu
Executive Officer, General
Manager of DX Promotion
Division

2025: business process reform, establishment of a digital
infrastructure, and development and enhancement ofdigital human resources.
To keep pace with the unpredictable, complex, andrapidly changing business environment, we will establish adigital infrastructure for connecting all Group employees
in a Co-Creation Cycle of knowledge and evolve into a
company capable of steadily yet urgently reforming its
business and work styles.

2

Key Initiative

3

Establishment of a Digital
Infrastructure

Development and Enhancementof Digital Human Resources• E xplore and promote the use of
ICT tools for improving the qualityof site operations• E stablish the necessary
environment and assist inpromoting the advanced use ofBIM• Create and promote the utilizationof a database of constructioncases• Formulate a policy for developing
digital human resources• Development sign effective digital
literacy education programs• V isualize and strategicallycultivate employee digital skills

Sludge collector withearthquake-proof mechanism
Equipment for scraping settled
sludgeSewageinflow

Sedimentation
basin

AEROWING
A diffuser that delivers oxygen to the reaction tank todecompose and purify contaminants, saving significant
energy by more efficiently transferring oxygen

Initial sedimentation
basin

SludgeDehydrated sludge istransported via highpressure pipelines

Mechanical concentration

SludgeBusiness process reform

Establishment ofa digital infrastructure

Significantly reduces electricity consumption
by installing a turbocharger in the incinerator
that burns dehydrated sludge

Dehydration

Incinerator
Ash
Research on
conversion to
fertilizer and feed

3 Generate new value throughconsolidation and analysis oftechnologies and data.

Case 1Case 2

Received an Order for Energy-Saving
Diffusers for a Large Sewage Treatment
Plant in Australia

Developed the Technology to Convert Sewage
Sludge into Feed and Fertilizer

In February 2023, AQUACONSULT, a Group company, received
an order for 5,700 energy-saving air diffusers used in the aeration
process* of sewage treatment at the Western Treatment Plant in
Melbourne, Australia, and the plant is scheduled to start operationsin the second half of 2024. It will treat 150,000 m3 of water per day,serving an equivalent of 750,000 people. The construction work
involves upgrading the huge lagoon, which stores 485,000 m3
of water per day, by replacing it with reaction tanks equippedwith energy-saving diffusers. Furthermore, the diffusers will bearranged at closer proximity to enable the removal of organic
matter and nitrogen. The order
was awarded based on theproven life cycle cost, stableperformance, and energy
efficiency of the 1,700 diffusersthat have been in operation at
the plant since 2019.
*Provides oxygen to microorganisms that process organic matter andnitrogen contained in the water

SANKI REPORT 2023

Discharge

Disinfection

Turbo-charged fluidized bed
incineration system

Piston pumpSludge4 Achieve business transformationand technological innovation tomeet the needs of future society
and the environment.

Development andenhancement ofdigital human resources

32

Final sedimentation
basin

Aeration tank

SludgeDyna Sand Filter
A sand filtration systemcapable of continuous
operation without clogging

SANDEC G3 decanter centrifuge

Realize the happinessof colleagues

Co - Creation Cycle of Knowledge

Natural Capital

Sewage Treatment Mechanism and Sanki Engineering’s Major Technologies

Separates sludge into water and solids. Its highcentrifugal force improves decanting performance
while reducing power consumption.

1 Promote digitalization acrossthe Company by connecting
management and site
operations.

Intellectual
CapitalWastewater is an inevitable by-product of human society and industrial activity. The Sanki Engineering Group has helped enhance
comfortable living environments by providing advanced water treatment systems that combine wastewater purification and reusetechnologies. Sewage treatment facilities require enormous amounts of energy, and we recently observed strong demand for energy
conservation toward creating a sustainable society. In addition, as Japan’s population continues to fall, the declining volume of waterflowing into sewage treatment plants has posed the major challenge of downsizing to reduce treatment costs and scale. Sanki Engineering
is making a technological contribution to various stages of the sewage treatment process by fully leveraging the total engineering expertise
we have cultivated over the years.

Gravitational concentration

We will become an organization that connects
all Group employees through a Co-Creation Cycle of knowledge.

2 Raise the creativity of
individual employees byapplying Company-wideknowledge.

Our Technological Contribution to
Sewage Treatment Facilities

Feature 2 / Feature 3• Visualize, implement statusmanagement, improve efficiency,
and standardize businessprocesses• S implify, consolidate, andreorganize, and standardize
operations and documents• R eview the division of roles anddivision of duties in construction
management operations• Construct a new, integrated
business system

3

FeatureGrowth Strategies and Sustainability Management

In April 2023, Sanki Engineering established the DX
Promotion Division as a Group-wide headquartersorganization to develop digital infrastructure andimplement business reforms for a sustainable future. As anorganization which connects all Group employees througha Co-Creation Cycle of knowledge, the division will promote
initiatives for achieving further growth as well as reform
work styles and improve productivity.
The DX Promotion Division’s main mission is to planand promote Group-wide digital technology strategy
and provide solutions that apply digital technology to thebusiness issues faced by each division.
As the first milestones for realizing our DX vision,
we will be implementing three key initiatives by around

Human Capital

Growth Strategies and Sustainability Management ︱Sewage sludge is invariably generated in the process of treating sewage,
and the conversion of sludge into feed and fertilizer has been attracting
attention. In March 2023, a joint research project by Akita Prefecture,
the Tokyo Metropolitan Government’s Bureau of Sewerage, and SankiEngineering on low-cost technology for converting sewage sludge
incineration ash into fertilizer was adopted as a feasibility study for the
Ministry of Land, Infrastructure, Transport and Tourism’s Breakthrough by
Dynamic Approach in Sewage High Technology (B-DASH) Project. The
technology is expected to lower costs and save energy by using a simple
method for converting the incinerated ash of sewage sludge into granularfertilizer. In addition, in April 2023 our researchon the conversion of sewage sludge into feed
and fertilizer using insects* was selected by
the ministry for its FY2023 Applied Researchon Sewage. This innovative technology is used
for feeding sewage sludge to immature insects
and converting the adult insects into feed andGranular fertilizer made fromtheir feces into fertilizer.
incinerated ash*Joint research by BioAlchemy Inc. and the Okinawa Institute of Science and Technology
SANKI REPORT 2023

33

︱

Growth Strategies and Sustainability Management ︱We strive to realize a sustainable society through businesses
that are kind to people and the environment.

Net Sales
Composition Ratio

Eiji Mitsuishi

82%

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

Orders
Received(Billions of Yen)

182.5
Net Sales for
Fiscal 2022

(Billions of Yen)billion yen

194.8
157.6 156.7 160.5

Net Sales

155.7

billion yen

179.3
153.0

171.5

155.5 155.4 155.7

170.0

155.7
billion yen*Includes the results of the Facility
Systems Business.

20182019 2020 2021 2022 2023 (FY)Forecast

20182019 2020 2021 2022 2023 (FY)Forecast

Facilities Construction Business• Increased demand for environmentally sound facilities for realizing a decarbonized society• E xpanded investments in manufacturing facilities for semiconductors, batteries, and otherproducts, and in data centers• E xpanded demand for building renewal arising from urban redevelopment• Increase in materials and labor costs, and delayed delivery of materials and equipment• S taff shortages, including at subcontractors, in the face of increasingly large-scale properties

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

Key Initiatives for Strengthening the Business Foundation
Key Initiative 1

Improve construction quality

Strengthen the Company-wide division of labor system for construction work and enhanceconstruction quality by promoting occupational health and safety in unison with the Health and
Safety Cooperative Association.
Key Initiative 2

Improve productivity

Reduce the workload of site managers and improve operational efficiency by promoting the Smile
Site Plan and DX in construction management, pass down technical skills, and increase productivity
through human resource development.
Key Initiative 3

Boost competitive strength

Boost competitive strength by using the Sales Force Automation systems and information sharing
to clarify and more accurately respond to customer needs, implement thorough cost and delivery
time management through the collection of procurement data for materials and equipment, anddevelop technologies in collaboration with the R&D Center.

KPIs for Medium-Term
Management Plan“Century 2025” Phase 3

FY2025 Targets

FY2022 Results

Evaluation

Number of serious accidents

0

0

◎

Incidents resulting in suspending
production

0

0

◎

Major Results for Fiscal 2022
 Value of orders received increased due to large construction
projects and secured ample carryover to the next fiscal year.
Net sales remained flat year-on-year due to postponed plans
and construction schedule delays. Profit decreased due tocarried over sales, soaring prices of materials and equipment,
and rising labor costs.
⃝ 
While reinforcing the exchange of information on delivery
dates and cost of materials and equipment, we also promptly
placed orders related to projects received to minimize the riskof price fluctuations for materials and equipment.
⃝ 
We focused on reducing problems and complaints within
five years after the completion of construction. We also
improved design accuracy by conducting design reviews
and checking other companies’ blueprints, and avoided
passing on problems to the construction site by undertaking
relevant activities during review meetings held at the start ofconstruction. In addition, we conducted true cause analysis ofproblems to prevent recurrence.
⃝ 
We strengthened Company-wide collaboration and an onsite
support system as part of activities for promoting the Smile
Site Plan*. Sales representatives developed risk reviews forrelevant sections on construction conditions, personnel
aspects, and construction schedules. We also boosted
productivity by promoting the use of ICT at both construction
sites and support departments, and operated the sales
support system to share information.
⃝ 
We actively offered proposals to customers on the use ofenergy-saving technologies as part of our effort to promote
the SANKI YOU Eco Contribution Point system, which
contributes to reducing customer CO2 emissions, and 249
proposals were adopted by customers.
⃝

Major Projects
Nidec Corporation Mukomachi Project Building C (HVAC andplumbing systems/new construction work)
Nippon Life Yodoyabashi Building (HVAC, plumbing, and electricalsystems/new construction work)
Toyota Technical Center Shimoyama (plumbing and electricalsystems/new construction work)
Otemachi Nomura Building (HVAC/renovation work)
Yamagata Prefectural Shinjo Hospital (HVAC/new construction work)
SUMCO TECHXIV Nagasaki Plant No. 6 Building (HVAC, plumbing,and electrical systems/extension work)

Facilities Construction Business

Opportunities andRisks in the Business
Environment

Growth Strategies and Sustainability Management

In the Facilities Construction Business, we provide comfortable environments forbuildings, factories, public facilities, and other structures through total engineering thatcombines diverse component technologies. We conduct business by always listening
to society and continuously refining our technologies, firmly committed to conserving
energy and resources, and achieving our goals for decarbonization. Meanwhile, in the
pursuit of happiness for colleagues, which includes our subcontractors, we will first takeon the pressing task of adapting to Japan’s revised Labor Standards Act, rebuild a robust
business foundation by implementing DX, and engage in other initiatives to change ourwork system toward the ultimate goal of realizing a sustainable society.

194.8

Nippon Life Yodoyabashi Building*T he Sanki Engineering Group’s own work style reform measurestargeting construction sites.

34

SANKI REPORT 2023

SANKI REPORT 2023

35

︱Growth Strategies and Sustainability Management ︱Facilities Construction BusinessWe present new styles and value for space in officeenvironments during a period of transformation.
Status of Business Operations and Future Outlook toward Achieving Phase 3

Kimio Kadowaki
Executive Officer, General Manager of the Facility Systems Division

Focus

Strengthening the Promotion of DX across Divisions
We are bolstering our digital infrastructure by taking into
account ongoing operational improvements and new
systems of work. We will further strengthen DX promotion
across divisions, from raising the efficiency of sales activities
and administrative operations in the field to increasing
productivity by improving the efficiency of construction
work. At our existing construction sites, we are converting
design and construction drawings into 3D drawings using
the BIM software Rebro and promoting the use of pointcloud 3D scanning. Furthermore, we will develop digital tools
and robot-related technologies to secure construction quality
and save labor in site management by creating a databaseof drawings produced to date for advanced BIM operations
such as digital twinning.

Opportunities andRisks in the Business
Environment

Promoting Project Proposals that Contribute to Carbon
Neutrality and Technological Development
In addition to presenting customers with renovation andoperation proposals for energy conservation, we will also
work on new areas such as hydrogen energy. At the sametime, we will advance the development of new technologies
that meet society’s needs for energy conservation and energy
creation, thereby strengthening our ability to make proposals.

• Change in the post-COVID-19 office market• Expanded need to introduce effective mechanisms and ICT tools for work style operations
including teleworking• Growing expectations for the total integration business of building ICT using advanced digitaltechnology• Increased opportunities for reconstructing and reviewing ICT infrastructure driven by DX

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

Facility
Systems

Facility Systems Business

Smart
Building
Solutions

Installing Optimal HVAC Facilities for the Respective Roles of Each Area

Renovation and Upgrading Work for
the Yamagata Prefectural Shinjo Hospital
As a member of a consortium handling HVAC facilities
work, Sanki Engineering was in charge of construction for arenovation and upgrading project at the Yamagata Prefectural
Shinjo Hospital, the only designated core hospital in the
Mogami region of Yamagata Prefecture. We installed various
equipment for removing the heat load, adjusting roompressure, and securing cleanliness in accordance with theroles and characteristics of each area and room in the hospital.
For dialysis rooms in particular, where patients stay for long
periods of time, we introduced our proprietary MEDIFORT® air
conditioning system that controls airflow to provide comfort
to patients lying on beds by preventing drafty conditions.
Furthermore, in operating rooms, intensive care units, andsterile rooms, we constructed a system that circulates fresh air

36

The Facility Systems Business was launched in 1989 as an in-house venture,so this year marks its 34th year. We have steadfastly achieved growth byleveraging the strengths of our two business areas of facility systems and smart
building solutions to present new styles and value for space in offices and otherindoor facilities. Both business areas provide services that support working
environments in terms of hardware and operations and can play their part inbuilding the foundations of the future, including DX promotion. We intend to
become the fourth pillar of Sanki Engineering’s business by consistently being
first on the scene of customer transformations in the coming years.

SANKI REPORT 2023

and room air through high-performance dust removal filters
to maintain a high level of cleanliness. We will continue
to play our part in constructing safe and secure medical
facilities by integrating Sanki’s diverse facilities technologies.

Yamagata Prefectural Shinjo Hospital

KPIs for Medium-Term
Management Plan“Century 2025” Phase 3

Key Initiative 1

Expand consulting service offerings

Key Initiative 2

Enhance sales and production structures for business expansion

Key Initiative 3

Deepen existing business areas

Key Initiative 1

Strengthen the total integration business of building ICT

Key Initiative 2

Expand onsite information and the communication infrastructurebusiness

Key Initiative 3

Nurture specialized engineers

FY2025 Targets

FY2022 Results

Evaluation

Orders received for consulting/facility
engineering

400 million yen

140 million yen◯

Orders received for projects related to
NeWSICT*

500 million yen

160 million yen◯

Orders received for project management
and construction work resulting fromconsulting and other sales approaches

2.1 billion yen

1.08 billion yen◎

3.0 billion yen

1.38 billion yen

Facility Systems Business

Handling Large-Scale Urban Redevelopment
Projects and Growth Areas Such as Semiconductor
Manufacturing Facilities
As the scale of urban redevelopment projects andmanufacturing facilities for semiconductors, batteries,
pharmaceuticals, and other products continues to grow,more projects will require a Company-wide response basedon the collaborative efforts of sales, design, and engineering.
For projects involving the entire Company, we share
information within the associated business division, adjust
personnel planning with due consideration for construction
areas and periods, establish construction systems, andprovide backup for construction work and procurement

to ensure an appropriate response for each property. In
growth areas where we expect continued investment, weview our active participation in projects as an opportunity toincorporate cutting-edge technologies and expertise, which
will lead to gaining more stock projects in the future.

Growth Strategies and Sustainability Management

Accelerate Work Style Reforms by Promoting the Smile
Site Plan
To prepare for the enactment of Japan’s revised Labor
Standards Act in April 2024, we will promote the Smile Site
Plan to simultaneously improve onsite capabilities and quality
and reduce the workload of construction managers throughactive use of ICT tools and digital transformation. Since wehave a particularly large number of ongoing construction
projects in fiscal 2023, we will maintain a close exchange of
information to ensure effective collaboration between theheadquarters organization, branches and branch offices,and construction sites, and will regularly check the status of
each. Partnerships with subcontractors will be strengthened
to cooperatively accelerate work style reforms, and we will
grasp the respective working conditions and workload statusof each site manager while appropriately adjusting onsite
staffing as needed.

Expand consulting service offerings

Total*N ext Work Style with ICT

SANKI REPORT 2023

37

︱

Growth Strategies and Sustainability Management ︱Facility Systems Business

Facility Systems Business

Net Sales
Composition Ratio

6

%

13.3

Orders
Received(Billions of Yen)billion yen

13.3

12.1
10.6

(Billions of Yen)

10.9

12.0

11.7
billion yen

11.7 12.0
11.0 11.1 11.1 11.0

Net Sales for
Fiscal 2022

11.7
billion yen

20182019 2020 2021 2022 2023 (FY)Forecast

20182019 2020 2021 2022 2023 (FY)SANKI REPORT 2023

• Growing need for automation and labor-saving solutions arising from thedecline in Japan’s working population• Increased investment in logistics facilities and manufacturing facilities forbatteries and semiconductors• Increase in materials and labor costs, and delayed delivery of materials andequipment

Environmental
Systems
Business• Expansion in decarbonization needs• Japanese government policy for promoting PPPs and PFIs*• Expansion in energy conservation needs at overseas water treatment plants

Spaces that can be moved to suit the purpose

Major ClientsA chemical manufacturer (head office construction, work styleconsulting, and relocation project management)A securities company (office construction for a call center andrelocation project management)An asset management company (head office construction andrelocation project management)
An Internet service company (construction of a data center andcommunication infrastructure)

Status of Business Operations and Future Outlook toward Achieving Phase 338

Machinery
Systems
Business*A public private partnership is a public-private sector collaboration to provide public services, while a
private finance initiative is a representative PPP approach.

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

automated control systems. In terms of network solutions, wewill strive to increase orders through aggressive sales activities
in response to robust demand for capital investments in
information infrastructure for data centers, distribution
warehouses, and commercial facilities.
Develop New Services with Expanded Scope
To expand the scope of our business, we will explore
possibilities for collaboration with startup companies. We willconduct an open innovation program for conceiving andimplementing new value by linking the innovative ideas andtechnologies of startups with Sanki Engineering’s component
technologies to create new services and solutions.

Plants & Machinery Systems Business

Opportunities andRisks in the Business
Environment*A company (“SIer” for short) that undertakes systems development.

Promote Total Integration Business of Building ICT
We intend to increase orders for building management
solutions by proposing total integration that incorporates
surveillance cameras, security systems, fire alarms, andother equipment when upgrading central monitoring, and

The Plants & Machinery Systems Business supports social infrastructure in the two businessdomains of machinery systems and environmental systems. The Machinery Systems
Business applies material handling technologies to meet automation and labor-saving
needs and updates these technologies with new advances in AI, IoT, and robotics. The
Environmental Systems Business contributes to reducing the environmental load andrealizing carbon neutrality by developing energy conservation and energy creation
technologies in the construction and operation of water treatment and waste treatment
facilities. Sanki Engineering will continue to step up to address social challenges andprovide our own unique solutions to consistently achieve sustainable growth.

Plants & Machinery Systems Business

Facility Systems⃝ Enjoyed steady growth in the consulting business, such as
by winning a large order for a non-financial project, resulting
in a favorable flow of orders received.
⃝ Expanded sales channels led to an increase in inquiries.

Develop Services that Originate from Consulting
We will aggressively promote sales and proposal activities
originating with our consulting services to identify the needfor large-scale office relocation, work style review, and reviewof spaces in the post-pandemic office. We will also develop
solutions that leverage our strengths as a total engineering
company and respond to market needs in light of trends
such as smart offices.

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

Forecast

Major Results for Fiscal 2022

Smart Building Solutions⃝ In the area of network solutions (ICT), orders received, sales,and profit on sales increased significantly as we focused on
projects with more pronounced investment activity thanthose in the previous fiscal year, such as data center andlogistics facility projects.
⃝ In the area of building management solutions(instrumentation), we focused on sales activities as a system
integrator* (SIer).

Kazuaki Iijima

Growth Strategies and Sustainability Management

10.8

Net Sales

We consistently step up to address social challenges
and provide a variety of solutions.

Machinery
Systems
Business

Key Initiative 1 Increase orders for standard conveyors
Key Initiative 2 Accelerate entry into the automation and labor-saving market andlogistics market

Key Initiative 3 Establish a network of maintenance and servicing businesses

Environmental
Systems
Business

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

KPIs for Medium-Term
Management Plan“Century 2025” Phase 3

Machinery
Systems
Business
Environmental
Systems
Business

Targets (Total for FY2022–2025)

FY2022 Results

Evaluation

Net sales of robot systems

5.0 billion yen

550 million yen◯

Orders AEROWING
G3 decanter
centrifuge
Fluidized bed
incinerator

3.6 billion yen

800 million yen◎

20 units

1 unit△2 units

0 units△

SANKI REPORT 2023

39

︱Growth Strategies and Sustainability Management ︱Plants & Machinery Systems Business

Plants & Machinery Systems Business

Net Sales
Composition Ratio

17

%

31.5

Orders
Received(Billions of Yen)

33.7 34.5

8.9
7.8

31.5
11.6

Net Sales for
Fiscal 2022

32.8

21.7

24.2

28.7

billion yen

2018

2019

35.0

2020

19.9

30.6

32.2

34.4

32.5

35.5

11.7

11.1

8.9

23.0

20.4

23.2

23.5

Forecast

2018

2019

2020

38.0

32.8

9.6

12.0

2021 2022 2023 (FY)

Machinery Systems Businessbillion yen

7.6

25.8

2021

25.2

12.0

26.0

equipment that requires high cleanliness environments.
Additionally, we will continue to analyze the market to formbusiness alliances and partnerships with external entities for
future business expansion.
Promote Business Reform
We will implement business reform for reinforcing thefoundations for ensuring continuity and supporting

growth areas. We will collaboratively promote DX with
the DX Promotion Division and the Technical Research &Development Center. These efforts include the effective
use of 3D-CAD, introduction of emulators, creation of adatabase of design results, and research on applying thelatest technologies such as AI, drones, and 5G to improve
operational efficiency and increase productivity.

2022 2023 (FY)Forecast

Environmental Systems Business

Environmental Systems Business
Major Results for Fiscal 2022

Machinery Systems Business
Major Results for Fiscal 2022⃝

Arita Manufacturing

Major Projects
Facility for Arita Manufacturing (delivered in March 2023)
Facility for Narita Airport’s Terminal 1 (delivered in June 2022)

Status of Business Operations and Future Outlook toward Achieving Phase 3
Expand Sales of Core Products
We will continue to conduct our ongoing business activities
with a focus on expanding sales of our core products,
such as standard conveyors, various conveyance systems
for logistics facilities, factory automation, airports, andmedical facilities. At the same time, we will expand our
product line to meet growing automation needs in the foodindustry and medical facilities. In addition, we will strive tostrengthen our product value by proposing equipment thatwill save energy and improve transportation efficiency aswell as by providing added value such as facility predictive

40

SANKI REPORT 2023

maintenance systems.
Enter the Automobile, Semiconductor, and Overseas
Markets
We plan to enter growth areas such as manufacturing
facilities for EVs and semiconductors, where significant
demand is expected, as well as overseas markets, byleveraging the technical skills and flexible response
capabilities that we have cultivated over the years. As
part of this effort, we established a clean room at the
Yamato Product Center for developing and manufacturing

Plants & Machinery Systems Business While orders received increased due to large construction
projects, profit declined as a result of a decrease in work
carried over from the previous fiscal year and fewer
construction projects for large conveyance facilities.
⃝ 
Introduced a web-based product training system for sales
personnel to increase orders for standard conveyors.
⃝ Completed commercialization of the Reverse Sorter®,a vertical conveyer and sorting system for the logistics
market, and Meris Bianca®, a robotic sorting system, andexhibited both products at the Logis-Tech Tokyo 2022
international exhibition.
⃝ 
Sales remained steady for automation and labor-saving
systems using robots. We also achieved progress in sales
collaboration with robot manufacturers.

 Orders received decreased due to the absence of a large
maintenance and management contract and an order fora waste treatment facility obtained in the previous fiscal
year. Although net sales decreased, profit increased dueto the improved profitability of construction work.
⃝ 
Enjoyed strong global sales, as exemplified by major
orders placed by large-scale sewage treatment plants in
Denmark and Australia for AEROWING, an energy-saving
ultrafine bubble air diffuser.
⃝ Participated in the Ministry of the Environment’s
FY2022 Demonstration Project for the Effectiveness ofDecarbonized Resource Recycling Businesses Utilizing
Digital Technology.
⃝ Sanki’s technology for low-cost technology for converting
sewage sludge incineration ash into fertilizer was adopted
for a feasibility study for the FY2022 Breakthrough by
Dynamic Approach in Sewage High Technology Project of
the Ministry of Land, Infrastructure, Transport and Tourism.
⃝ 
Introduced an AI waste crane system, which automatescrane operations at waste incineration facilities, to Clean
Hill Tenzan.
⃝

Growth Strategies and Sustainability Management

12.0

10.3

(Billions of Yen)billion yen

39.5

36.5

32.8

Net Sales

New incinerator at SU Kaihatsu

Major Projects
Kasai Water Reclamation Center’s northern system reactor facility
Kanazawa Wastewater Treatment Plant’s No. 6 system reaction
tank and blower facilities
Construction work for the new combustible waste joint
processing facility at the Ochi Clean Center
Construction work for the new incinerator at SU Kaihatsu

Status of Business Operations and Future Outlook toward Achieving Phase 3
Expand Sales of Products that Meet Energy
Conservation Needs
Given the continued demand for renewing infrastructure
facilities in response to changing social and environmental
trends, such as a declining population, there is a growing
need for energy conservation for achieving carbon
neutrality. We will strive to expand sales of strategic
products, such as the energy-saving AEROWING ultrafine
bubble air diffuser, the highly efficient G3 decanter
centrifuge, and the fluidized bed incinerator.

Promote LCE Business to Secure Stable Long-TermBusiness
Changing global circumstances have given rise to the needto consider risks and price fluctuations when handling
projects. For example, the recent sharp rise in prices hascreated a challenge for securing the business feasibilityof woody biomass gasification power generation, which
we have been pursuing as an energy creation business.
In addition, we will strive to ensure the stable operationof projects for which we already undertake maintenanceand management operations, while striving to win orders

SANKI REPORT 2023

41

︱Growth Strategies and Sustainability Management ︱Plants & Machinery Systems Business︱

Foundation of Sustainability Management ︱Sustainability Managementfor DBO projects to expand our business and accumulate
operational expertise for the future.

Focus

Machinery Systems BusinessContributing to improve efficiency and reduce labor in loading operations and save space at work sites▍Policies andGuidelines on
Sustainability

Environmental Systems BusinessRealized Automated Crane Operation for Efficient and Stable Operational Managements

Introduction of an AI Waste Crane System at Clean Hill Tenzan
To address the shortage of workers and reduce operational management costs at waste incineration facilities, we developed
the AI Waste Crane System to automate crane operation at waste incineration facilities.
Crane operation of waste requires workers with ahigh level of experience to determine the type and levelof waste in the bunker. The system ensures efficientand stable operation by optimizing crane operation
with AI that visualizes the inside of the waste bunker todetermine the type and height of waste. Compared tonight-time manual crane operations, this significantly
reduces the workload, reducing labor by approximately
60%.
The system was installed and has been reliably
operating at Clean Hill Tenzan, located in Taku City, Saga
Prefecture, under the operational management of Group
company Sanki Chemical Engineering & Construction in
Automated operation
a DBO project.

SANKI REPORT 2023

Management Philosophy

P. 24

Sustainability Policy
Sustainability-Related Policies of Human Rights Environmental Procurement
PolicyPolicyPolicythe Sanki Engineering GroupSanki Group
Code of Conduct
and Action
Guidelines

Sanki EngineeringGroup Materiality

Stakeholder Engagement

https://www.sanki.co.jp/en/csr/
governance/engagement/

System for Promoting Sustainability
The Sustainability Committee deliberates and decides on key issues and measuresrelated to sustainability. In addition, a Sustainability Promotion Council, consistingof personnel in charge of sustainability from each division, was established as asubordinate body of the Sustainability Committee to examine and disseminate
measures, review the progress of each division’s materiality-based activities,
and monitor related trends and information. Agenda items that significantly
impact business and management strategies are submitted and reported to
the Management Meeting and the Board of Directors for decision and approval,
depending on their relative importance. The Board of Directors supervises
the progress of activities based on the KGIs and KPIs set in the Medium-Term
Management Plan. This system enables us to address sustainability issues in all ourbusiness activities, including throughout the supply chain.
▍Sustainability
Promotion System

Board of Directors
Discussion, reporting

Supervision

Management Meeting
Discussion, reporting

Leadership, supervision

Monitoring, guidance,
support, education

Sustainability Promotion Council
Information sharing, collaboration

Decides on important issues andmeasures to realize sustainable
management. Meets twice a year.
CompositionC hairperson:
President and Representative
DirectorM embers:
Directors and persons nominatedby the chairperson
S ecretariat:
Sustainability Promotion
Department
Main Agenda for FY2022• Outlook for carbon neutrality andpromotion of decarbonization
measures• E nhancement of the SANKI YOU EcoContribution Point system

Sustainability
Promotion Council

Sustainability Committee
Repor ting

Sustainability Committee

Plants & Machinery Systems BusinessConveyor line with a total length of 320 meters

Focus

In accordance with its management philosophy of “creating comfortable environments through engineering and widely
contributing to social development,” the Sanki Engineering Group formulated its Sustainability Policy and laid out its“Vision for 2050—Sanki, The Enduring Company of Choice.” We are promoting sustainability management by addressing
stakeholder demands and expectations and incorporating them in our corporate activities and by contributing
technological solutions to social issues. We have also identified the five materiality issues of the Sanki Engineering Groupand have set KGIs and KPIs under our Medium-Term Management Plan “Century2025” Phase 3 (FY2022–2025) to assess
the progress of our initiatives. Through these efforts, we will contribute to the environment and society while at thesame time securing profit to achieve sustainable development for many years to come

Delivery of Conveyor Line to an Apparel E-Commerce Company
In March 2023, we delivered a 320-meter long conveyor line to an e-commerce company handling women’s apparel, which
has increased its sales fivefold over the past five years. Previously, the entire process, from item picking to packing andshipping, had been managed by hand. The new conveyor line automates the supply of shipping boxes and the sorting ofboxes from the packing area to each delivery company, thereby improving efficiency and saving labor in loading operations.
The new system also saves spaceby virtue of its two-tier configuration
with the shipping box supply line on
the upper level and the sorting line todelivery companies on the lower level.
We are also scheduled to deliver
our newly developed Reverse sorterto the center in August 2023, with the
expectation that it will further improve
work efficiency and labor savings.

42

Basic Philosophy

Foundation of Sustainability Management

Develop Overseas Markets for Water Treatment Facilities
Our efforts to develop overseas markets for water treatment
facilities are being led by AQUACONSULT Anlagenbau
GmbH, a Group company based in Austria that has been
enjoying robust sales in recent years, as we strive to expand

sales of strategic products mainly in Europe and the Middle
East. Meanwhile, in Southeast Asia, where large-scale water
treatment facilities are not widely available, we will continue
to promote our proprietary technologies, such as a drainage
treatment unit based on the DHS method, while exhibiting
at local trade shows and developing local networks toincrease business opportunities.

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

Sustainability Promoters

Risk Management
Issues identified from the risks and opportunities related to our value chain areevaluated and prioritized against the two axes of improving corporate value andimproving environmental and social value, to determine our five materiality issues
and incorporate them into our measures and target setting for the Medium-Term
Management Plan. Over the course of this process, we ensure these considerations
are appropriately reflected in our decision-making for sustainability managementby collaborating with the Risk Management Committee, which oversees andmanages risks for the entire Group.

Implements measures to ensure
awareness of sustainability-related
policies and keeps track of progress.
Meets twice a year.
Composition
Members:
Sustainability promoters from eachdivision
Secretariat:
Sustainability Promotion Department

P. 87

Risk Management

SANKI REPORT 2023

43

︱Foundation of Sustainability Management ︱Sanki Engineering Group Value Chain
The Sanki Engineering Group is engaged in the life cycle engineering (LCE) business, in which we handle the entire processfrom facility planning and design to procurement, construction, operational management, maintenance and inspection,and renovations and renewal. We seek to generate diverse benefits that meet stakeholder expectations by addressing
opportunities and risks in the context of sustainability management across the value chain of our business activities.

Foundation of Sustainability Management

Social Issues
Declining population, falling birthrates,
and aging population

Climate change
Upstream⃝ Shift to a decarbonized society⃝ Limited resources

Facility Design⃝ Resource circulation⃝ Waste issues

Subcontractors⃝ Labor shortage

Delivery⃝ Human rights risks⃝ Fair procurement⃝ Supply chain risks⃝ Safety first

Construction

Manufacturers, Business Partners

Spread of COVID-19

Work style reform

Aging infrastructure⃝ Quality assurance⃝ Ensuring information security

Construction

Subcontractors

Subcontractors

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

Construction andConstruction
Management
We have developed a nationwide construction management
system, drawing upon our ample experience and advanced
technical skills, and implement high-quality construction operations
in collaboration with as many as 859 companies that make up our
Subcontractor Group. In addition to strengthening internal controls
and systems for supporting site operations, we aggressively adopt
new technologies and improve construction methods to advance
automation and save labor in the construction process, and wemeet diverse customer needs by providing customized construction
options that effectively balance quality and cost.

● Cultivation of trust and enhanced collaboration● Promotion of health and safety activities● Securing and fostering human resources and● Proposal for disaster prevention and mitigation facilities● Proposal and design for meeting the demand for HVAC

and clean rooms that prevent infections● Response to increased demand for data centers andopen offices due to promotion of teleworking● Promotion of the SANKI YOU Eco Contribution Point
system● Proposal and design for reducing environmental impact● Proposal and design for energy creation facilities● Appropriate management of customer information,
protection of personal information

enhancement of technology● Promotion of diversity● Promotion of work style reform and developmentof workplace environments● Promotion of green procurement● Initiatives for CSR procurement

Sanki Engineering● Securing and fostering human resources and● Fair, equal, and transparent business relationships● Utilization of DX to raise efficiency of procurement

operations and reduce onsite workload● Promotion of DX initiatives, including BIM● Response to information security risks● Promotion of green procurement● Initiatives for CSR procurement

Downstream

workplace environments● Initiatives for preventing problems and complaints● Promotion of DX initiatives, including BIM● Response to information security risks● Support for stabilizing the business of subcontractors● Cultivation of trust and enhanced collaboration with subcontractors● Initiatives for preventing problems and complaints● Promotion of health and safety● Promotion of health and safety activities● Promotion of work style reform and development of● Promotion of health and safety activities● Response to human rights issues● Response to human rights issues

enhancement of technology● Promotion of diversity

Sanki Engineering

Sanki Engineering● Response to human rights issues

Upstream● Utilization and protection of intellectual property

with business partners● Promotion of green procurement●  Initiatives for CSR procurement● Response to material shortages and delivery delays● Response to human rights issues

Upstream● I nitiatives for preventing problems and complaints● Initiatives for diversifying the supply chain

Customers● Development and introduction of construction-related

automation and labor-saving technologies● Initiatives for preventing problems and complaints● Maintenance and enhancement of customer satisfaction● Promotion of health and safety activities● Support for stabilizing the business of subcontractors● Cultivation of trust and collaboration with subcontractors● Response to human● Active proposals for

improving worksites● Development andactivities● Securing and fostering humanintroduction of
resources and enhancement ofconstruction-related
technology
automation and labor● Promotion of diversity
saving technologies● Promotion of work style reform● Initiatives for preventing
and development of workplace
problems and complaints● Proper disposal andenvironments● Promotion of DX initiatives,
reduction of waste● Compliance withincluding BIM● Response to information security risks
environmental regulations● Improved productivity and reduced● Reduced risks toonsite workload based on systematic
biodiversity arounddivision of labor
construction sites● Response to human rights issues● Initiatives for preventing problems and complaints

Sanki Engineering● Response to human rights issues● Promotion of health and safety activities

Upstream● Response to human rights issues

Downstream

Upstream
SANKI REPORT 2023

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

Use, Renovation, and Renewal

Downstream

Maximize Opportunities and Minimize Risks

44

Maintenance

Downstream

Sanki Engineering

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

Procurement
and Ordering

Downstream

Design offices

Construction
companies

Facility Design

Sanki Engineering Group Value Chain

Customers

Planning

rights issues● Promotion of healthand safety activities● Securing and fostering
human resourcesand enhancement oftechnology● Promotion of diversity● Promotion of work style reformand development of workplaceenvironments● Initiatives for preventing problems
and complaints● Proper disposal and reduction ofwaste● Compliance with environmental
regulations● Response to introducing BIM● Response to the need for contact-free means of humaninteraction● Realization of optimal operational management that saves
energy● Reduced environmental impact based on generating energy
and the recycling and reuse of resources● Initiatives for preventing problems and complaints● Proper disposal and reduction of waste● Compliance with environmental regulations● Realization of safe, secure, and comfortable environments

SANKI REPORT 2023

45

︱Foundation of Sustainability Management ︱Environment

E

S

G

Environment

SocialGovernance

Environment
Basic Philosophy

Sanki Engineering Group Environmental Policy

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

Environmental
Management System
環境マネジメントシステム⨋ Basic Policy and Management System⨋ Virtuous Cycle in Management System

In addition to providing training programs on EMS, we are working to improve the levelof management by encouraging our employees to acquire qualifications required byenvironment-related laws and regulations.
After the waste incineration facilities we constructed in 2019 were cited fornoncompliance, we followed our standard procedures to take action to prevent any
recurrence, and we are continuing to strengthen our management system. In fiscal
2022, we conducted four environmental management training sessions (one for new
employees and three for internal auditors), which also included Group companies.
We also ensure the effectiveness of our management system through internal
audits and checks during ISO certification audits. In fiscal 2022, no nonconformities
were found in the internal or external audits, and there were no violations ofenvironmental laws and regulations or issues reported regarding noise, dust, or odor atconstruction sites, confirming that our management system is operating properly.
⨋ Environmental Risk Assessment

We assess environmental risks at each construction site, including those overseas,
before construction begins. We use our own JOB Environmental Aspects Assessment
List, consisting of 10 aspects and approximately 70 items, for an accurate and efficient
review of the wide variety of applicable environment-related risks and regulations,depending on the nature of work and the surrounding environment. In fiscal 2023,
we made major revisions to the list, in particular to improve its sustainability elements
and take into account local bylaws. Assessing environmental risks, including potential

46

SANKI REPORT 2023

All our business activities and services,
including those overseas, are considered inmanaging our environmental impact.

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

P. 55
Quality and Environmental Management
SystemNumber of Employeeswith Environment-Related
Qualifications (as of April 1, 2023)•C ertified environmental measurer
Non-consolidated: 7
Consolidated: 8• Supervisor of managementof industrial waste subject tospecial control
Non-consolidated: 183
Consolidated: 208•P ollution prevention manager(cumulative total)
Non-consolidated: 61
Consolidated: 92•Q ualified person for energy
management
Non-consolidated: 88
Consolidated: 91

Environmental Aspects Assessed
under the JOB Environmental
Aspects Assessment List (FY2023)
1. R educed use of resources andenergy for customers and users
2. R eduction and proper disposal of waste
3. Abnormal situations and outflow ofcontaminants
4. Consideration for areas
surrounding construction sites
5. Consideration for uniqueenvironmental needs
6. Natural disasters⨋ Information Disclosure Based on TCFD Recommendations

The Sanki Engineering Group has endorsed the recommendations of the Task Forceon Climate-related Financial Disclosures (TCFD) and therefore discloses climate-related
information in accordance with the required framework. Of the five material issues
identified for sustainability management, we place the highest priority on contributing
to a decarbonized society, and we are addressing climate change by mitigating risks
and capturing opportunities.
⨋ Governance

The Sanki Engineering Group established the Sustainability Committee, chairedby the president and composed of members of the Board of Directors, to address
climate change and sustainability issues in general. The committee discusses andmakes decisions on key issues and actions for realizing sustainability management. All
deliberations and decisions made by the committee are reported to the Management
Meeting and the Board of Directors for review and approval. Issues that may have asignificant impact on our business and management strategies are also presented
to the Management Meeting and the Board of Directors for further discussion andapproval, depending on their relative importance.
The Sustainability Promotion Council, established as a subordinate body of thecommittee and composed of persons in charge of the related practical matters in eachdepartment, communicates the deliberations and decisions of the committee to theentire Group, discusses and supports specific activities to promote sustainability, andmonitors progress.

Recognized as an “A List” company, thehighest rating given by the CDP in thearea of climate change. The CDP is aninternational non-profit organizationthat oversees the global disclosuresystem for companies in managing theirenvironmental impact.
Click here for details:

https://www.sanki.co.jp/news/release/article468.html ( Japanese only )Environment

Our integrated management system, consisting of an EMS (ISO 14001) and a QMS(ISO 9001), manages the impact in terms of risks and opportunities of our businessactivities on the environment, including the natural environment that surrounds theGroup. Under our system for implementing environmental management, headed by
the president, each division sets targets and formulates plans for the implementationof measures in accordance with its annual action plan. Progress is reviewed at thedivisional and general meetings.
In addition, the Sustainability Committee, which is mainly composed of directors,
discusses sustainability issues in general and deliberates and determines actions toaddress environmental issues, including climate change. Progress is monitored by the
Board of Directors, and issues that may have a significant impact on our management
and business strategies are discussed in the Management Meeting and Board of
Directors meetings, depending on their relative importance, and incorporated into theMedium-Term Management Plan.

Scope of ISO 14001
Certification

Addressing
Climate Change toward a Decarbonized Society
環境マネジメントシステム

Foundation of Sustainability Management

In accordance with the Sanki Engineering Group Environmental Policy, we strive to conserve the global environment inall our business activities, including the supply chain, with the intention of realizing a decarbonized society, recyclingoriented society, and society in harmony with nature. Having identified our efforts in response to environmental issues
as a key management concern, we are primarily working to contribute to a decarbonized society as our top-priority
material issue as well as to use engineering to build a comfortable environment.

ones, can allow us not only to reduce our environmental impact but also to avoid
work schedule delays and additional costs by gaining the understanding of local
communities and government authorities related to our work sites.

P. 43
Sustainability Management Promotion
System⨋ Risk Management

Our Risk Management Committee oversees and manages risks that impact theentire Group. It identifies and categorizes business-related risks, determines thesubcommittees in charge and content of control plans, assesses the risks by quantifying
their impact and frequency insofar as possible, formulates and implements priorities
and response policies, and conducts periodic reviews.
With regard to climate-related risks, the Climate Change Risk Subcommittee
conducts scenario analysis to extract and assess the impact of climate change risks.
The decided measures are submitted to the Sustainability Committee, Management
Meeting, and Board of Directors for further decision and approval, depending on
the relative importance of the assessed risk, and are then implemented by all the
departments of the Group. Measures included in the Medium-Term Management Planare incorporated into the execution plans of each division to manage their progress.

P. 43
Sustainability Risk Management

PP. 87–88
Risk Management Promotion System

7. Legal compliance
8. Local bylaws governing job location
9. Temporary materials and equipment,
and office and other supplies
10. Other aspects

SANKI REPORT 2023

47

︱

Environment

Foundation of Sustainability Management ︱⨋ Strategies

verified and assessed in the three stages of high, medium,and low.
Adopted Scenarios

Reference Scenarios

1.5°C scenario• Scenario Analysis and Financial Impact Assessment
We analyzed 1.5°C and 4.0°C scenarios in terms of relations
to policies and market trends, and we also analyzed physicalchanges engendered by events such as disasters. For eachscenario, causes of Group-wide risks and opportunities havebeen identified and their degree of impact on businessNet zero is reached by 2050 by taking
stringent measures against climatechange, and the temperature
increase in 2100 is limited to 1.5°C
or below from the level of theIndustrial Revolution

� I EA: Net Zero Emissions by 2050

4°C scenario� I EA: Stated Policies Scenario(NZE)

�I PCC: Shared Socioeconomic

Transition Risks
Category

Policies and Regulations

Technology

Increase in carbon taxes and prices for renewable energy
certificates (RECs) and stricter CO ₂ emission regulations

Advances in energy conservation andrenewable energy technologies

Impact on
business

Increase in carbon tax burden Increase in construction
and costs of purchasing RECs costs due to rising costs ofmaterials and equipment,
and other expenses- Technological obsolescence
Concerns over a possible washout- D elayed technological support due to lack and decline in corporate brand imageof technical capabilities and engineers
due to insufficient climate action andinformation disclosure

Medium- to long-term

Medium- to long-term

Impact1.5°C scenario: Moderate
Minor
4°C scenario:

1.5°C scenario: Major
4°C scenario: Moderate

1.5°C scenario: Major
4°C scenario: Moderate

1.5°C scenario:
4°C scenario:

Promote decarbonization
measures and capital
investment

Strengthen procurement
capabilities throughcentralized purchasing, DX,etc.

- P romote development of energy
conservation and renewable energy
technologies- Promote open innovation- S ecure human resources and enhanceengineer training- P romote decarbonization measuresand capital investment- Proactively disclose information

Risks
Possible event
Impact on
business
Timeline
ImpactResponse

Major

Chronic
Rising temperatures- Delays in procurement of materials and equipment- Suspensions or delays in construction- S tagnation of business operations due to infrastructure
failures
Short-term/medium- to long-term
1.5°C scenario: Moderate 4°C scenario:

Possible event
Impact on
business
Timeline

Major- Operate BCMS for maintaining effective BCPs
- Strengthen cooperation with partner companies

Medium- to long-term
1.5°C scenario: Moderate
Major
4°C scenario:

Medium- to long-term
1.5°C scenario:
4°C scenario:

Markets
Expansion of energy conservation and renewable Growing need for greater coolingenergy markets
capacity

Expansion of climate services market- Increased demand for ZEB and other energy
conservation projects- Increased demand for energy creation projects- I ncreased demand for renovation projects to copewith disasters- I ncreased demand for construction projects andservices to cope with disasters

Short-term/medium- to long-term

Increased demand for renovation work
to boost cooling capacity

Medium- to long-term

Medium- to long-term

Impact1.5°C scenario: Major
4°C scenario: Moderate

1.5°C scenario: Minor
4°C scenario: Moderate

1.5°C scenario: Minor
4°C scenario: Moderate

Response- Promote development of energy conservation
and renewable energy technologies- Promote open innovation- S trengthen the SANKI YOU Eco Contribution
Point system- S trengthen system to quickly respondto customer needs- Strengthen the maintenance system- P romote LCE Business- S trengthen the total integration business ofbuilding ICT- Expand consulting services- Operate BCMS to maintain an effective BCP

SANKI REPORT 2023

Carbonneutrality

Carbonneutrality

FY202010% reduction–

FY2018–FY2020(average)

30% increase––

Category

Scope 1, 2

Base YearFY20208,061

Changes (%)

Results*
FY2021
7,849

FY2022
5,341

Comparedto the base
year

YoY

–34%

–32%

PP. 30–31

Feature 1

Scope 1

1,658

1,722

1,743

+5%

+1%

Scope 2

Indirect emissions causedby use of purchased
electricity or heat

6,403

6,127

3,598

–44%

–41%

6,161,990

5,005,392

3,931,712

–36%

–21%

344,460

345,217355,854

–36%

–21%

Category 1

Products and services
purchased

Category 2

Capital goods

7,419

5,518

7,763

Category 3

Fuel and energy
activities not included in
Scope 1 and 2

1,006

1,336

1,358

Category 4

Upstreamtransportation anddistribution

819

1,123

846

Category 5

Waste generated inoperations

1,481

1,744

1,856

Category 6

Business travel

332

401

402

Category 7

Employee commuting

658

965

963

Category 11

Use of sold products

5,800,139

4,643,385

3,558,271

Category 12

End-of-life treatment ofsold products

1,483

1,381

1,548

Category 13

Downstream leased
assets

4,193

4,322

2,851

6,170,051

5,013,241

3,937,053

Total*Scope: Sanki Engineering GroupWe have obtained third-party assurance
for the results.
Note: C ategories 8, 9, 14, and 15 are notapplicable.
Independent Third-Party
Assurance Report

Direct emissions frombusinesses owned
or controlled by theCompany

Major

Resilience

40% reduction

Emissions (t-CO 2)

Minor- P romote occupational health and safety in Improve productivity through DX
cooperation with partner companies
promotion- Develop technologies to prevent occupational
hazards and robot replacements

FY2050▍Greenhouse Gas Emissions

Minor- I ncreased risk of heat stroke and other
Increased construction costs due tooccupational hazards
decreased productivity and increased- More severe labor shortages due to deteriorating costs for countermeasures
working conditions at construction sites

FY2030Carbonneutrality

Scope 3

Acute

*Scope: Sanki Engineering GroupFY2025(medium-term
management plan)

Base YearFY2020

Scope 3

Short-term/medium- to long-term

More frequent and severe natural disasters

Category

Opportunities

Medium- to long-term

Physical Risks
Category

Scope 1, 2

Increased demand for climate action
and information disclosure

Timeline

Governance

Environment

Possible event

Response

48

Review

Social▍Greenhouse Gas Reduction Targets

Reductions through the SANKI
YOU Eco Contribution Point
system▍Risks and Opportunities

Environment⨋ Indicators and Targets

Scope(STEPS)� I PCC: Shared Socio-economic
Pathways (SSP5-8.5)

G

In February 2022, we established the Sanki Carbon Neutral Declaration as a longterm goal, and we have incorporated our carbon transition plan into the mediumterm management plan. We will address climate change by focusing on reducing
greenhouse gases based on the following indicators.

Pathways (SSP1-1.9)

Stringent measures against climatechange are not taken, and thetemperature increase in 2100 isaround 4°C from the level of theIndustrial Revolution

S

Foundation of Sustainability Management

Scenario analysis is conducted to gain an understanding of
the medium and long-term impact of climate change on
business. Risks and opportunities identified through theanalysis are incorporated into Phase 3 of the Century 2025
medium-term management plan and addressed as part ofthe plan.

E

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

SANKI REPORT 2023

49

︱

Environment

Foundation of Sustainability Management ︱⨋ Initiatives for Emissions Reduction (Scope 1 and 2)▍Energy Consumption（MWh）

FY2022
Energy consumption*

22,793⨋ Contribution to Reductions through Our Business Activities (Scope 3)

610.5

647.7

- EcoSearcher® real-time heat source
optimization system (proprietary
technology)- s elFort® smart HVAC system foroffices (proprietary technology)•Y amato Product Center- P eriloop thermal stratification
HVAC system (proprietary
technology)- Solar photovoltaic panels*S cope: Sanki Engineering GroupWe have obtained third-party
assurance.
Independent Third-Party
Assurance Reporthttps://www.sanki.co.jp/en/csr/governance/
multistakeholder/

SocialGovernance

The Sanki Engineering Group’s SANKI YOU Eco Contribution Point system contributes,
along with our partners, to preventing global warming and realizing a sustainable
society. Under the system, when we propose an energy-saving solution that reduces
CO2 emissions to a customer and that proposal is adopted, the amount of theachieved emissions reduction is converted to Eco Contribution Points, used to support
environmental conservation activities.
Under the Medium-Term Management Plan “Century 2025” Phase 3, we aim tobolster this system as a measure for reducing Scope 3 emissions. In addition, we haveaccelerated our efforts to achieve the Sanki Carbon-Neutral Declaration, issued in
February 2022, by raising the price per ton of CO2 reduction from 100 yen to 200 yen
starting in fiscal 2022. In fiscal 2022, we received 322 orders (on a consolidated basis)and reduced CO2 emissions by 50,382 tons, up 97% from the average of the three-year
period from fiscal 2018 to 2020, thereby achieving the KPI in the Century 2025 Phase
3 of the medium-term management plan. The cumulative volume of CO2 emissions
reduced since the first year (fiscal 2010) on a consolidated basis reached 317,692 tons,
with over 21,000 trees planted.
We will continue to develop proposals for reducing CO2 emissions and offer an evengreater contribution to environmental conservation activities.
▍Proposals for CO2 Reduction and Outcomes

The logo of the SANKI YOU EcoContribution Point system expresses
our aspiration to contribute to social
development and create harmony with
the natural environment.
ECO2: We reduce CO2 emissions throughour contribution to ecology.

PP. 26–28
Medium-Term Management Plan“Century 2025” Phase 3(CO2 reduction unit: t-CO2)

FY2019FY2020

FY2021

FY2022

Numbers CO2 reduction Numbers CO2 reduction Numbers CO2 reduction Numbers CO2 reduction Numbers CO2 reduction

Proposals

Trans-Heat Container for delivering thermalenergyConsolidated

411

50,072405

45,685379

68,810431

134,399488

131,820

Nonconsolidated

370

45,531377

44,756352

68,243

367

112,550452

105,116

Consolidated

183

20,699181

27,624

214

28,430263

35,848322

50,382

Nonconsolidated

163

16,608163

27,221200

28,296218

14,355294

24,533

Orders received▍SANKI YOU Eco Contribution Point System
1. P ropose
energy-saving
solutions(Millions of Yen)

690.5

Environment⨋ SANKI YOU Eco Contribution Point System

FY2018Woody biomass gasification plant▍R&D Expenditures Related to Environmental Preservation

624.5

•S
 anki Techno Center

G

Environment

The Sanki Engineering Group’s Scope 3 emissions for fiscal 2022 are predominantly
Category 11, at 91%. We therefore seek to help customers save and generate energy
to reduce CO2 emissions and cut lifecycle costs through our business activities byenhancing the functionality and comfort offered by the technologies and products ofeach of our businesses. Through these efforts, we achieved a 36% reduction in Scope 3
emissions in fiscal 2022 compared to the fiscal 2020 level.
In our LCE Business, we seek to reduce environmental impact across the entire
product lifecycle, from planning and design in facilities construction to operational
maintenance after completion and also renovation. This assists in shifting to a
decarbonized, zero-waste society as well as environmental preservation. We willcontinue to expand business contributions to save and create energy, such as biomass
power generation plants, and pursue resource circulation through wastewater
treatment facilities and waste treatment facilities. We will also continue to focus on
research and development related to environmental preservation to continue reducing
emissions from our business activities.

Energy-Saving Systems Installedat Sanki Engineering Facilities

S

Foundation of Sustainability Management

To reduce emissions at our plants, offices, and construction sites, we have beenthoroughly implementing energy conservation activities by effectively operating
facilities at each location. At the Sanki Techno Center and Yamato Product Center, wehave installed several energy-saving systems to reduce energy, including those that
apply our proprietary technologies. The Sanki Techno Center switched to electricity
derived from renewable power sources to meet its electricity needs in April 2022,
resulting in a reduction of 2,651 t-CO2 compared to the previous level. Our Kansai
Branch Office also switched to carbon neutral electricity following its relocation. We
consequently reduced our total amount of Scope 1 and 2 emissions in fiscal 2022 by
34% compared to the fiscal 2020 level. Looking ahead, we will consider installing solar
photovoltaic panels and converting Company vehicles to EVs.

E

Customers
Propose using energy-saving equipment to
reduce CO2 emissions

2. P roposal
AdoptedSanki Engineering

3. Convert each tonne of reduced CO2 to 200 yen

4. D onate to environmental conservation groups

Environmental
conservation activity

669.3

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

2018

2019

2020

2021

2022

（FY）

⨋ Registered ZEB Planner

Sanki Engineering is a registered ZEB Planner, which seeks to promote the widespread
introduction of ZEBs* introduced by Japan’s Agency for Natural Resources and Energy,
under the Ministry of Economy, Trade and Industry. As a ZEB Planner, we act as thecontact point for customers planning to adopt ZEB in construction projects and play
our part in developing a decarbonized society by supporting ZEB planning.

50

SANKI REPORT 2023

*Net-Zero Energy Buildings maintaincomfortable environments while
reducing annual energy consumption
to as close to zero as possible byenhancing energy-saving performanceusing solar power generation and othermeasures.

With respect to industrial waste discharged at our construction sites, we seek tounderstand the current status by compiling data on waste discharged at sites
where Sanki Engineering is the prime contractor. Due to the impact of large
construction projects that involved demolition, our industrial waste emissions
increased in fiscal 2022.
We have maintained the recycling and reduction rate for industrial waste,
excluding waste disposed at final landfill sites, at 89.8% (non-consolidated) and
90.0% (consolidated) in fiscal 2022. We will continue to promote proper disposal
by monitoring and analyzing the discharge of industrial waste. In fiscal 2022, thewaste disposal cost for construction sites was 525,051,000 yen (non-consolidated)

Explanation for handling CFC during
HVAC inspections

SANKI REPORT 2023

51

︱

Environment

Foundation of Sustainability Management ︱

97.8

97.2

96.6

94.8

18,482
1,971

17,321986

18,0291,377

18,616
1,733

16,652

16,883

16,335

2020

2021

89.8
23,0481,324
21,7242022（FY）*S cope: Industrial waste discharged
at sites where Sanki Engineering is
the prime contractor and at domestic
Group companies
Recycling rate: Sanki Engineering Co.,Ltd.

⨋ Proper Disposal of Hazardous Substances*W aste Management and Public
Cleansing Law

At each site where facilities are owned by the Sanki Engineering Group, we regularly
monitor water use and continuously consider ways to improve the efficient use of
our water resources to reduce usage. Most of the water used is for offices and training
accommodations, and the resumption of training camps increased water use in fiscal 2022.
▍Water Use

Governance

Keidanren Initiative for Biodiversity
Conservation

Poster: “How to handle mercury-lacedindustrial waste”（m ）FY202237,06544,088

Tap water

10,54013,884

Well water

26,52530,204

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

Realizing a Society in Harmony with Nature⨋ Our Response to Biodiversity

In April 2022, we established the Sanki Engineering Group Action Guidelines on
Biodiversity, which is part of the Sanki Engineering Group Environmental Policy.
Under the guidelines, we will further strengthen our activities for planting andnurturing trees and promoting environment-related facilities.

Sanki Engineering Group
Code of Conduct and Action
Guidelines

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

Ministry of the Environment’s 30by30
Alliance For Biodiversity▍Donation History for Tree-Planting Projects
Recipient

Location

Corporate Supporter System

More trees

Shiga Prefecture/Lake Biwa Afforestation
Partnership Agreement: SANKI YOU Forest
Biwako Konze

Konze Forestry Association Ritto City, Shiga Prefecture
Ritto Tourism Association

Shibuya Ward, Tokyo

Wakayama Prefecture/Forest Conservation andManagement Agreement: SANKI YOU Forest
Ohechi Forest Association
Nanki-Shirahama

Shirahama Town, Wakayama
Prefecture

Planting trees in the Hikobae Forest on
Mt. Yagoshi

NPO Mori wa Umi no
KoibitoIchinoseki City, Iwate Prefecture

Planting trees in a forest surrounding
Shonan Village

Silva Association, Shinwa
GakuenYokosuka City, Kanagawa
Prefecture

Kansha-no-Mori forestation to commemorate
the 10th anniversary of the SANKI YOU EcoContribution Point system

NPO Environmental
Relations

Kai City, Yamanashi Prefecture

Creation of the Sanki Forest to commemorate
the 90th anniversary of our founding

NPO Environmental
Relations

Kai City, Yamanashi Prefecture

Creation of the Kijimadaira Beech Forest

NPO The Life style Research Kijimadaira Village, Nagano
Institute of Forests
Prefecture

Creation of the Present Tree Forest

NPO Environmental
Relations

3

FY2021

Water use

In addition to the tree-planting and nurturing activities under the SANKI YOU EcoContribution Point system, we created the Sanki Forest in Kai City, Yamanashi Prefecture,in 2015 to commemorate the 90th anniversary of our founding, and a Kansha-no-Mori
in 2020 to commemorate the 10th anniversary of the SANKI YOU Eco Contribution Point
system. We donate to reforestation projects that take full advantage of the diversity of
local vegetation and tree-planting activities that lead to enriching the bounties of thesea, and also engage in environmental conservation activities that include employee
participation.
Furthermore, we facilitated donations to three projects by four organizations infiscal 2022 to support environmental conservation activities for forest management
under the SANKI YOU Eco Contribution Point system.

Project⨋ Limiting Water Use

SANKI REPORT 2023

SocialEnvironment

2019⨋ Tree-Planting and Nurturing Activities

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

52

Environment■ Discharge by Sanki Engineering Co., Ltd. (t)Recycling rate* for Sanki Engineering Co., Ltd. (%)

2018

G

Foundation of Sustainability Management

Since fiscal 2010, we have supported reforestation through the SANKI YOU EcoContribution Point system. After raising the point conversion rate for this program,we signed agreements in March 2023 to expand our support for environmental
conservation activities, including a Forest Conservation and Management Agreement
for the Corporate Forest Project with Shirahama Town in Wakayama Prefecture as well
as Lake Biwa Afforestation Partnership Agreements with the Konze Forestry Associationand the Ritto Tourism Association, witnessed by officials of Shiga Prefecture and Ritto
City, respectively. We will continue to engage in reforestation and other communitybased activities through tree-planting events that involve the participation of Group
employees as well as other community outreach activities.

▍Changes in the Amount of Industrial Waste Discharged

16,511S⨋ Signing a Reforestation Agreement

and 554,862,000 yen (consolidated). Furthermore, we have been properly disposing
waste CFC and halons, the cost of which was 30,391,000 yen (non-consolidated) and
39,897,000 yen (consolidated) in fiscal 2022.
With the aim of ensuring the proper disposal of industrial waste, we have madedigital manifests available to all departments for waste management. The rate of
introduction of digital manifests was 99.2% on a non-consolidated basis and 98.9% on aconsolidated basis in fiscal 2022.
We work to reduce emissions of waste plastics and promote the recycling of plastics
in accordance with the Plastic Resource Circulation Act.

■ Discharge by Group companies (t)E

Takayama City,
Gifu Prefecture, Miyako City,
Iwate Prefecture, Sammu City,
Chiba Prefecture⨋ Use of Sewage Sludge

Taking advantage of our knowledge and experience with sewage sludge, which has
been attracting significant attention as a recyclable resource, we are working to use it
as a fertilizer. Most of the incinerated sewage sludge currently disposed of in landfills
contains a large amount of phosphorus, a main component in fertilizer. In addition todeveloping low-cost, energy-saving technology for extracting phosphorus, we are also
engaged in research and development for the use of insects to treat sludge and its
conversion into feed and fertilizer.

P. 33

Feature 3

SANKI REPORT 2023

53

︱

環境

Foundation of Sustainability Management ︱SocialQuality Control
Basic Principle

Initiatives for Ensuring Quality

Group Companies withISO Certification⨋ Management System

Passing the baton to the 64th expedition teamContributing to the
Antarctic Research
Expedition with People
and Technology

Clear skies after blizzard◦Sanki Engineering’s Involvement in the Antarctic Research
Expedition
The Antarctic Research Expedition is Japan’s national project forunderstanding the environmental changes in the Antarctic region as
well as the Earth overall. Sanki Engineering’s connection to Antarctica
goes back to 1957, when we delivered 30 roller conveyors for thesecond expedition to carry materials to the newly opened Showa
Base. Since 1991, when the Protocol on Environmental Protection to
the Antarctic Treaty was added in 1991 to the Antarctic Treaty System,
we have been dispatching our engineers to Antarctica by seconding
them to the National Institute of Polar Research. As of fiscal 2022, wehave dispatched 17 engineers to Antarctica.

▍Quality and Environmental Management System

54

SANKI REPORT 2023

lives of my colleagues, and I felt a strong
sense of responsibility and mission.
During my stay, I was able to apply theskills I had cultivated in my previous
work, which made me appreciate
its valuable. We had regular online
meetings with the Sanki EngineeringGroup and the National Institute of Polar
Research, and whenever there was an
emergency or equipment problem,
former expedition team members fromthe Group were there to support us,which was very helpful and reassuring.
Currently, two employees from SankiEngineering have been dispatched as
the 64th expedition team, with one ofthem handling my former duties. WhenI passed the baton to these two newmembers at the team change ceremony
at Showa Station, I was relieved to havesuccessfully completed an important
assignment.
Participating as a member of theteam made me once again realize theimportance of the Antarctic Research
Expedition. I would like to share thesignificance and importance of thisproject as well as my own experienceswith younger colleagues, and I hope thiswill lead to further advancing my career.

Company-wide QMS andEMS Office ConferenceEachdivisionOnce a year

Scope of ISO 9001 Certification

https://www.sanki.co.jp/en/csr/social/quality/
Our Response to
ISO 9001 and ISO 14001
Noncompliance (FY2019)

compensation)

Management
Meeting• Conducted ethics seminars for
Approves annual activity
plan for QMS and EMS

relevant divisions

P. 46

General manager of the Quality and Environmental Management Office

As a member of the 63rd expedition
team, I stayed at the Showa Stationin Antarctica for about a year from
December 2021 to January 2023.
I was in charge of environmental
preservation and engaged in such tasks
as maintenance and management offacilities treating domestic sewage andthe disposal and management of trashand other waste. When my supervisor
told me about the expedition, I
thought it would be a once-in-alifetime opportunity, so I decided tojoin the team.
Life in the harsh naturalenvironment of Antarctica is quite
simple and driven by the fundamental
challenge to survive. My job at the baseis to maintain and manage various
facilities or, in a way, to help protect the

3 companies:
Sanki Engineering Co., Ltd.
Sanki Chemical Engineering &Construction Co., Ltd.
Kankyo Service Co., Ltd.

• Penalty for directors (reduced

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

• ISO 14001

• V oluntary suspension of ISO 9001
and ISO 14001 certifications

Top Management (President)

ISO
Promotion
Conference

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

Quality Control

Major project to explore the future of the global environment

Fire drill(courtesy of the National Institute of Polar Research)• ISO 9001

SocialWorking at the site(courtesy of the National Institute of Polar Research)

We have integrated and implemented QMS (ISO 9001) and EMS (ISO 14001) at eachdivision in the Facilities Construction Business, Plants & Machinery Systems Business,and Environmental Systems Business.
Risk management is conducted in advance of the actual work for construction
and production to maintain and enhance quality. We also recognize that responding
to problems and complaints promptly and appropriately is a fundamental aspect of
quality management, and we take actions to consistently raise the standards of ourmanagement system.
In fiscal 2019, the quality management of the division in charge of a SankiEngineering Group project was found to be out of compliance. Activities put in place toprevent recurrence are now practiced as standard procedure to maintain and improve
our quality management system.

Foundation of Sustainability Management

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

Environmental Management System

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

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

Divisional
Management Review

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

Quality and Environmental Management Officer
Divisional QMS and EMS Office

Sales, design, production, construction, and office duties⨋ Major Management System Strengthened in Fiscal 2022

Masami Kaneshige
Proposal Office, Solution GroupSanki Chemical Engineering & Construction Co., Ltd.

The Facilities Construction Business worked on reducing the workload of site operations
as well as on improving design and construction quality in accordance with therevision of operational flow carried out in fiscal 2021. These efforts helped improve
design reviews, clarified quality targets, and led to fewer problems and complaints.
Furthermore, we strengthened the quality management system by reviewing and

SANKI REPORT 2023

55

︱Foundation of Sustainability Management ︱Social︱Quality Control⨋ Initiatives for Improving Quality by Promoting DX

The BIM Promotion Center leads BIM efforts within the Company and subcontractors
and in improving the usage rate of BIM-linked software as well as the participation
rate in BIM education. In fiscal 2022, we conducted in-house education to encourage
the use of BIM. We also implemented the M&A of a company that has provenexpertise in BIM.
In April 2023, we established the DX Promotion Division. We will advance theapplication, research, and development of digital tools for planning, construction,
and acceptance inspections to save labor in construction work while improving
construction quality by alleviating the burden of management operations. By bolstering
the application of DX to operations across the Company, including construction sites,
we will establish more comfortable workplace environments.

⨋ Sharing Information and Preventing the Occurrence of Problems andComplaints

In our work to improve construction quality, we conduct a customer satisfaction survey
at the completion of construction work and reflect the feedback in our operations.
In fiscal 2022, we received highly positive feedback from about 92%* of the 653
respondents. Looking ahead, we will continue to incorporate customer opinions into
our operations to enhance construction quality.

A poster for raising awareness of
preventing problems and complaints
is created each month and displayed atworksites.

*C alculated by regarding the following
responses as “highly positive feedback.”
Facilities Construction Business: scoreof 4 (“Somewhat satisfied”) or higher
out of 5; Plants & Machinery Systems
Business: score of 3 (“High”) out of 3;
Environmental Systems Business: scoreof 70 points or higher out of 100.

We are working on improving quality throughout the construction process from planningand design to completion. In design, we identify and resolve issues at an early stage toensure quality by enhancing design reviews and improving the design accuracy.
In technological management, we facilitate onsite operations after the start ofconstruction work by holding commencement discussions to decide on construction
methods, procedures, and policies that result in higher quality and productivity.
Moreover, we avoid falsifications and deficiencies in quality across all processes by
having line staff and the Quality Control Center conduct stringent checks and followups. We will continue to improve quality and hand down technical expertise by having
highly skilled quality assurance administrators and technical experts conduct audits
during and after construction, implement quality confirmation and corrections, andmentor junior employees.
As a result of the revision of our quality manual and standards and reviewing ofoperational processes undertaken in fiscal 2021, the number of design reviews doubled
in fiscal 2022. We also strengthened risk assessments at the upstream stage. These
efforts have led to fewer problems, complaints, and corrections after construction andhave helped prevent profitability from deteriorating.

⨋ Operational Support to Improve Productivity and Maintain High Quality

SANKI REPORT 2023

GovernanceDigital Tools Developed by the
Sanki Engineering Group• Automated robotic air flow
meter

Automatically measures the air flowfrom air conditioner vents.
Expected to reduce manhours by
75% compared to the conventional
process.

Air-flow measurement by an automated robot

Quality check by a quality assurance
administrator▍Initiatives on Design and Technical Operations at Construction Sites
Upon Receiving Orders

The Design Division’s Design Center and Quality Control
Center lead the design reviews to confirm whether therequired level of quality is met, by scrutinizing construction
operations from the aspects of quality and cost. Also, design
drawings will be more accurate.

Initiatives for Ensuring Quality at Construction Sites

56

Social⨋ Initiatives for Design and Technical Operations

Design Review

Sanki Engineering implements the Smile Site Plan, intended to create a rewarding
workplace that encourages staff to focus on their tasks by reducing workloads atconstruction sites and creating effective working environments, to satisfy bothcustomers and the Company while maintaining high quality.
Under the Smile Site Plan, we are leveling operations by establishing and effectively
implementing an operational support system for the processes of sales, design,
procurement, construction management, and quality management to improve
productivity while maintaining high quality. In an effort to simultaneously improve
productivity and maintain high quality, we particularly emphasize design verificationand pre-construction reviews before starting construction work, to raise productivity
and avoid quality risks and to prevent rework, problems, and complaints. In addition,
we are promoting digitalization, including the adoption of BIM, to further boost
productivity.

Environment

Quality Control⨋ Understanding Customer Satisfaction and Reflecting Feedback

G

SocialWe accumulate and share our quality-related experiences across the Company bymeans of technical documents in order to prevent the occurrence of problems andcomplaints or, in the event they do occur, to handle them quickly and effectively.
We strive to prevent recurrences by distributing information about problems andcomplaints to construction engineers through a flash bulletin, a weekly bulletin (aweekly meeting of the Problems and Complaints Review Committee, which is also
attended by Group companies in and outside Japan), and a monthly bulletin, which
not only reports the occurrence of issues but also discusses their causes, corrective
measures, and preventive measures. In fiscal 2022, we revised the format for the flash
bulletin and strengthened our engagements to identify the root cause of issues toimplement the necessary measures.
In addition to efforts to share information, quality risk assessments are conductedby the Quality Risk Subcommittee set up under the Risk Management Committee. We
also endeavor to prevent problems and complaints by identifying risks that may affectquality and quickly taking action.
We set a target to achieve zero problems and complaints attributable to us in theongoing construction, and in fiscal 2022 we reduced them by 25% (down 18 cases)
year-on-year thanks to various measures for providing onsite support. In fiscal 2023, weplan to reinforce the analysis and feedback procedure of our Quality Control Center toreduce initial errors.

S

Foundation of Sustainability Management

standardizing the format for function test results provided to customers.
The Plants & Machinery Systems Business advanced its initiative to create a databaseof construction undertaken by the Company to boost the effectiveness of its quality
control. As for the Environmental Systems Business, it continued to improve thechecking system for each process, including stricter design reviews.

E

Quality Risk Assessment
The Quality Risk Subcommittee of the Risk Management
Committee assesses quality risk. Divisions related totechnology and the Quality Control Center set the quality
targets and identify and address quality risks.

At Start of Construction
Commencement Discussions
Divisions related to technology, onsite
managers, and divisions related tobranches and branch offices determine
the construction method (procedures)and quality targets. The Quality Control
Center checks aspects concerning quality,
construction work, costs, processes, andsafety; identifies items requiring changes in
specifications and plans; instructs on concretemeasures; and considers design changes.

During Construction
Construction Audits
Confirmation of construction work, including
design changes, is led by divisions related totechnology, onsite managers, divisions related
to branches including branch offices, and the
Quality Control Center.
Completion Audits
Check whether quality targets for the design
are being achieved and offer instructions forcorrections as needed.

Enhancing Our Technologies⨋ Technical Awards for Improving Construction Methods andOperational Processes
P. 68
Promoting the Smile Project

We have been presenting awards for excellent ideas that improve operational
processes, such as raising efficiency, in addition to ideas that improve construction
work. In fiscal 2022, we received 2,087 applications.

SANKI REPORT 2023

57

︱

︱

SocialFoundation of Sustainability Management ︱Quality Control

Occupational Health and Safety⨋ Fostering Human Resources to Sustain Our Technological Competence

Basic Principle
Our construction site operation relies on the organic connection of the many people working there. Occupational
health and safety are the foundation for the Sanki Engineering Group and are of the highest priority. Under the SankiEngineering Group Basic Health and Safety Principles, we partner with subcontractors in a range of health and safety
activities.
Basic Health and Safety Principles

https://www.sanki.co.jp/en/csr/social/safety/
Training for new employees▍Number of Personnel with Quality-Related Qualifications (as of April 1 of each fiscal year)
FY2022
Qualification

Initiatives for Ensuring Occupational Health and Safety

FY2023

Consolidated

Nonconsolidated

Consolidated

92

102

80

93

1,125

1,277

1,061

1,225

Architect

37

42

38

42

Facilities construction architect

201

210

179

190

Electrical engineers

162

236

150

230

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

Nonconsolidated⨋ Management System

21st conference on electrical construction
quality

We conduct risk assessment and analysis that correspond to the specific circumstancesof accidents that occurred in the previous fiscal year, as well as to social and industrial
trends, in order to formulate annual guidelines for safety and health activities. By
formulating a Company-wide health and safety activities plan based on theseguidelines, we seek to visualize our PDCA cycles, including the analysis of risk factors
and implementation of remedial and preventive actions.

26

34

24

36

First class instrument engineers

297

306

284

294

⨋ Key Items Implemented in Fiscal 2022

Fire protection engineers

699

783

662

722

1,635

1,921

1,529

1,806

As part of our efforts to create comfortable working environments, we updated our
uniform in June 2022. The new uniform was tailored with consideration for the various
needs of all employees working at construction sites, such as fabric type and pocket
location, which we identified through a questionnaire.
To reduce the number of accidents, we conducted all-division safety patrols at
22 construction sites and increased training opportunities for safety managers andworkers. In fiscal 2022, however, the number of accidents increased by two from theprevious year. Many of them were caused by inadequate operational procedures(insufficient risk assessment) or human error.
In view of the accidents in fiscal 2022 and the required responses to the Revised
Labor Standards Law scheduled for enforcement in 2024, we will work in fiscal 2023 on
implementing appropriate risk assessments based on job reports and work proceduresand provide education related to the revised law.

Note: Cumulative figures are shown for all qualifications.
▍Major Skill Development Activities for Fiscal 2022
Initiatives

Initiatives
at the Sanki
Techno Center

Initiatives forpassing ontechnology

Initiatives
for Groupcompanies andsubcontractors

Training

Description of Training

Results

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

64 participants

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

125 participants

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

• 3- to 5-day training sessions that are held 2 to 5 times per
year at 3-year intervals• S tandardized group-based training according tooperational experience• Technical training using actual equipment and mock-ups• D rills for preventing problems and complaints required inconstruction management

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

25 technical experts made 1,343 site visits(cumulative total)

Conference on electrical construction
quality• Test of practical skills for electrical technicians fromsubcontractors of all branches, written exam based on pastcases. Participants receive the Sanki Engineering-certified
Class A Electrical Engineer qualification

17 participating technicians from 18
subcontractors• C ase studies at liaison meetings held at branches andbranch offices

Number of sessions
Tokyo branch: 12, Kansai branch: 25,
Chubu branch: 11, Kyushu branch office:
43, Hokkaido branch office: 5, Chugoku
branch office: 10, Tohoku branch office: 12,
Hokuriku branch office: 3

Explanation of problems and complaints

Held 8 times

114 participants

Workplace safety
poster

Occupational Health and Safety

Qualified managing engineers

New uniforms

SocialChief electrical engineers

Foundation of Sustainability Management

The Sanki Techno Center provides training to help employees acquire basic skills, brushup on their skills, and attain qualifications. New employee training was conducted inperson by implementing tighter infection prevention measures in the accommodationarea, lecture area, and experience area. We also conduct training for construction
managers every three years, with content corresponding to number of years ofexperience. We develop the skills of our engineers through hands-on practice and drills
using actual machinery and facilities at the Sanki Techno Center.

Workplace healthposter

Outline of Activities in Fiscal 2022: Policies on Health and Safety Activities
Safety
Slogan: Making safety a reality. Each one of us is in charge—let’s
keep up the Stop & Check practice!

Key Actions

1. Promote physical, real, and onsite hazard prediction activities◦ Periodic accident prevention campaign◦ Focused patrols that address accident tendencies

2. Visualize the Three as One activity◦ Create a system where construction sites, subcontractors, and Sanki Engineering
cooperate to prevent accidents; promote relevant activities◦ Revise criteria for health and safety awards◦ Develop the Sanki Occupational Health and Safety Management System

3. F urther enhance knowledge, awareness, andunderstanding◦ Increase training opportunities for safety managers
and workers◦ Brush up original educational programs for employees
at construction sites◦ Systemize online health and safety training◦ Add content to the health and safety video⨋ Collaborating in the Industry through Open Technology

Construction instructions for the Aluminger®* aluminum refrigerant piping method
developed by Sanki Engineering have been made available to the Aluminum Plumbing
Equipment Association. By promoting the adoption of our method, which reduces
labor by 25% compared to conventional methods, we are contributing to standardizing
environmentally sound technology across the entire industry.

58

SANKI REPORT 2023

*A new construction method whereby
lightweight aluminum pipes, insteadof copper pipes, are connected withspecialized tools to save labor.

HealthSlogan: Create comfortable workplaces together for healthier minds and bodies

Key Actions

1. Implement measures on health and productivity management◦ Reduce long working hours, encourage employees to take days off◦ Take action against lifestyle-related diseases, strengthen activities to support
more exercise

2. Implement mental health measures◦ Create a system for providing mental health care

SANKI REPORT 2023

59

︱

︱

SocialFoundation of Sustainability Management ︱Occupational Health and Safety

Supply Chain⨋ S afety Conventions and Safety Patrols

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

⨋ H ealth and Safety Training

Safety patrol by the president

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

114

(91)

In-house health and safety training

412

(0)

Position-based training for young and mid-career employees

111

(8)

536

(536)

Other client-focused training
Total● Frequency rate for Sanki Engineering ● Average frequency rate for the general construction industry*3◆ Severity rate for Sanki Engineering    ◆ Average severity rate for the general construction industry*3■ Number of accidents

1.69
1.09

0.29

0.30
0.10
0.00
1
2018

60

1.11

SANKI REPORT 2023

0.03
11
2019

1.30

1.39

0.44

0.44

3
(Year)

0.24
0.03

2020

3

0.41
0.11

2021

1.47
0.58

5

0.22
0.02

2022

（FY）

and Our Procurement Management System
The procurement cost of materials and equipment used by Sanki Engineering
for construction work is approximately 46.0 billion yen, with domestic suppliers
representing the source for nearly all procurement.
The role of the procurement department includes contributing to profit by reducing
costs and supporting orders, building and managing procurement databases, andcollecting and disclosing information on material and equipment price trends anddelivery dates. As the prices of materials and equipment surged and delivery delays
continued due to global factors, including the COVID-19 pandemic and semiconductor
shortage, the department raised the level of coordination with construction sites,
thereby facilitating advance order placement and prompt in-house sharing of delivery
information, among other efforts that have helped prevent or mitigate procurement risks.
⨋ Thoroughly Ensuring Fair and Equitable Transactions*Limited to training by in-house
instructors, not including training at
designated educational institutions

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

⨋ Accidents in Fiscal 2022

▍Number of Accidents, Frequency Rate*1, and Severity Rate*2⨋ Overview of Our Procurement Structure for Materials and Equipment

Online health and safety training

3,400 (2,444)

In fiscal 2022, there were five accidents, an increase of two from fiscal 2021. A detailed
analysis of the circumstances of these accidents revealed they were mostly the resultof shortcomings in operational procedures, so a continuous effort will be required topromote thorough compliance with the rules and raise the level of our activities by
sharing information.

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

Scope: S anki Engineering construction
sites (Sanki Engineering Co., Ltd.
and business partners)
Number of accidents:
interrupted work for one day or longer
Period: The data compilation period waschanged from the calendar year
to the fiscal year starting withfiscal 2020 results.
*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 S everity rate: Calculated as thenumber of lost workdays caused by
accidents in the construction site per
one thousand working hours, thisfigure indicates the severity of theaccidents.
*3 S ource: Survey on Industrial
Accidents, Ministry of Health, Laborand Welfare.

⨋ Operation of Internal Whistleblowing Hotlines

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

Procurement Policies (excerpt)
1. F air Market Competition andTrading
2. Protection of the Global
Environment
3. C ontribution to Society throughBusiness Activity
4. Respect for Human Rights
5. I nformation Security Risk
Management
6. Development of Partnerships

Major Components of thePartnership Building Declaration

Supply Chain

2,227 (1,809)

Health and safety training for foremen

Sanki Engineering Group Environmental Policy

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

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

SocialNumber of Participants (from Subcontractors)

Special education and other courses

Sanki Engineering Group Human Rights Policy

Building Fair, Equal, and Transparent Business Relationships▍Number of Participants in Health and Safety Training (Fiscal 2022)*
Type

Multi-Stakeholder Policy

https://www.sanki.co.jp/en/csr/social/scm/*Thai Sanki Engineering & Construction
Co., Ltd.

For Group employees and for staff employed by subcontractors, Sanki Engineering
provides training led by in-house instructors or at designated training institutes. When
accepting new foreign national technical intern trainees from their employers, we
use standardized criteria for ensuring safety at all sites and carry out interviews by our
employees to comply with these criteria. We also organize joint training sessions with
the Sanki Health and Safety Cooperative Association.
In fiscal 2022, as in the previous year, we focused on conducting special training
sessions using full harness-type equipment with the aim of preventing falls, in view ofregulatory revisions. Sessions involving skill practice were conducted face to face bythoroughly implementing COVID-19 prevention measures. The mode and methods oftraining are determined by considering the risk of serious accidents and the importanceof the topic. Online training is conducted to mitigate the burden of trainers byconnecting multiple sites.

Sanki Engineering Group Procurement Policy

Foundation of Sustainability Management

Every fiscal year, each branch, branch office, and division of Sanki Engineering holds safetyconventions at 11 domestic sites and 2 overseas sites in June, the preparatory month for
National Safety Week. Subcontractors from around the world participate in the convention.
Executive officers from Japan, including our president, attended the convention,
which took place at one of our sites in Thailand*. Employees and subcontractors who
demonstrated outstanding efforts and achievements in safety management received
awards. We also conduct special joint safety patrols, during which the president anddirectors tour 26 construction sites in the summer and before and after year-end.

• Co-existence and co-prosperity
across the entire supply chain
and collaborations beyond scale
and affiliation- S trengthening of relationship via
the Health and Safety Cooperative
Association- O pening of the training facility for
public use and support for humanresource development• Compliance with the Act on the
Promotion of Subcontracting
Small and Medium-sizedEnterprises- Appropriate determination ofprice, and negotiations- Considerations for payment terms- Not demanding the free transfer ofintellectual property rights- P reventing any negative impact
associated with work-style reformor other factors

P. 84

Whistleblowing System⨋ Promoting Green Procurement

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

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

SANKI REPORT 2023

61

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

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

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

Total

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

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

⨋ Providing Assessment Feedback to Business Partners⨋ Joint Improvement Activities with Subcontractor Groups

Sanki Engineering has established subcontractor groups at each branch, branch
office, and division as part of our effort to bolster our construction system. In addition
to monthly liaison meetings, we implement joint labor-saving projects and holdseminars to enhance technical skills and thoroughly enforce quality management andsupervision of safety and health at construction sites. Moreover, we review the statusof safety and health management and offer guidance by dispatching employees to62

SANKI REPORT 2023

We established the Sanki Super Meister System to certify and commend foremen of Group
subcontractors whose superior construction techniques have significantly contributed toelevating the quality of our construction work and also the Sanki Best Partner Program
to commend subcontractors who have significantly contributed through their superior
levels of management and construction skills, and for having consecutive years of zeroaccidents. We provide subsidies designed to encourage further quality improvements to
subcontractors to which the certified foremen belong, from the standpoint of promoting
consistent contributions to quality improvements at construction sites.
⨋ I nitiatives for Maintaining and Upgrading the Technical Skills of

Subcontractors
To support subcontractors in the development of their technical skills, we subsidize theacquisition of qualifications, and we have been publicizing the system during Central
Safety and Health Committee meetings to encourage its use. We have promoted thecreation of a mechanism for enhancing technical skills based on collaboration between
Sanki Engineering and subcontractors, in which the Sanki Techno Center is also used totrain new hires and mid-career employees of subcontractors. Furthermore, as part ofour technical training program, new hires at Sanki Engineering receive guidance from
employees of subcontractors.

P. 60

Governance

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

Awards ceremony

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

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

VOICE

To raise quality and improve operations across the supply chain, we annually survey
the status of our business partners and, as part of this initiative, assess their safety
management. We pay visits to provide them with feedback on the assessment results
and exchange information on improvements as needed to enhance their safety
management capabilities.

Social⨋ Awards Programs• CSR procurement• Sustainability initiatives

Environment

Supply Chain

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

G

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

Procurement WEB

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

S

Foundation of Sustainability Management

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

E

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

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

Health and Safety Training

SANKI REPORT 2023

63

︱Foundation of Sustainability Management ︱SocialHuman Rights

Human Resources
Basic Philosophy

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

Recognizing that human capital is the most important management resource for a company’s existence and stable growth, we believethat securing and developing human resources is critical and spare no expense to invest in our personnel as the Company’s future. Withthe “pursuit of happiness for colleagues” identified as one of our material issues and under the management philosophy of “placing
significance on communication and mutual respect,” we endeavor to create workplace programs and environments in which all
employees grow with the Company, respect individuality, and are able to succeed and thrive.

Sanki Engineering Group Human Rights Policy

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

Sanki Engineering Group Code of Conduct and Action Guidelines

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

Smile Work Guideline (Workplace Environment and Human Resource Development)

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

Sanki Engineering Group Human Rights Policy

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

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

Human Rights Promotion System
The Risk Management Committee (Compliance Risk Subcommittee) identifies andmonitors human rights risks among the managed risks while at the same timestrengthening the promotion system.

Sanki Engineering’s Human Resource Strategy andManagement System⨋ Human Capital Strategy

Whistleblower Hotline and Consultation Service for
Human Rights Issues

We provide training and other opportunities to ensure that all employees have a goodunderstanding of human rights. Employees who participated in the training held in
fiscal 2022 learned about human rights initiatives and gained a deeper respect for theinternational human rights standards. The Sustainability Handbook, containing ourpolicies and important explanations, is distributed to all Group employees, helping toraise awareness of human rights.

Whistleblowing System

Representative Topics in the
Sustainability Handbook• Direct and indirect impacts on
the supply chain• M ajor human rights issues andillustrative cases• U N Guiding Principles
on Business and Human
Rights, OECD Guidelines forMultinational Enterprises on
Responsible Business Conduct

P. 85

Addressing Human Rights Issues in the Workplace
In addition to formulating guidelines for preventing harassment, we conduct
a workplace survey on compliance, including questions about harassment andhuman rights risks. We identify issues from survey findings and reports from
employees and continuously provide employee training to prevent and eradicate
harassment.

Addressing Human Rights Issues in the Supply Chain
In accordance with the Sanki Engineering Group Human Rights Policy and the SankiEngineering Procurement Policy, we conduct due diligence on human rights issues
relevant to the Group’s business activities at every level of the supply chain.

64

SANKI REPORT 2023

Compliance Training and the Handbook
for Cementing Respect for Compliance

P. 86
Compliance Workplace Survey• Developing Human Resources
We believe that the Company’s growth is driven by the various employee viewpoints
and values that reflect the rich variety of their experiences, qualifications, and attributes.
We therefore promote diversity in our workplace, properly evaluate the skills of eachindividual employee, and provide suitable education and training. We also strive toensure the diversity of core personnel as well as equal opportunities for promotion to
managerial positions.
• Improving Company Environment
We endeavor to create a working environment and a corporate culture in which all
employees grow with the Company, respect individuality and are able to succeed
and thrive. We support employee work-life balance and manage business with due
consideration for employee well-being. We also seek to raise employee engagement
by emphasizing communication with them.
⨋ Structure and New Personnel System

As one of the key measures for becoming the “Company of Choice” under the MediumTerm Management Plan “Century 2025” Phase 3, we launched a new personnel system
to improve employee comfort and satisfaction in April 2022.
The launch involved defining and streamlining the organization. We significantly
cut back the number of line managers and clarified their responsibilities so they could
better concentrate on their managerial tasks, and then we revised our compensation
system to reward employees for high performance in their own fields of specialization,
which in turn enabled us to place the right people in the right jobs. We plan to conduct
interviews in all branches and branch offices in fiscal 2023 to verify the effects of therevision, and we increased wages in fiscal 2022 by 4.6% (compared to fiscal 2021) toimprove employee working conditions.

• Utilize DX to balance improvements
in quality and productivity with
reduced working hours• Secure and nurture human resources
with due consideration for diversity

Indicators and Targets for Human
Resource Development
Scope: Non-consolidated•A ctive promotion of younger employees
Indicator

Target (April 2026)
Actual values as of April 2023
in Parentheses

Average ageof those inmanagerial
positionsManagers:
45.8 years old (46.4 years old)
General managers:
50.2 years old (51.8 years old)
Executive managers:
53.5 years old (54.1 years old)

Human Rights / Human Resources

Human Rights Training

P. 84• Reform of the personnel systemcentered on the active appointmentof young people and extension of
the retirement age

SocialA whistleblower hotline and consultation service for human rights issues are madeavailable for use by all employees of the Group as well as those at its subcontractors
and supply chain members, with the information posted on the Company’s website.
Reporters will not be placed at a disadvantage for consulting or reporting issues, andany personally identifiable information will be protected.

In the context of Phase 3 actions with new indicators and targets based on the Human
Resource Development Policy and Company Environment Improvement Policy, we areaccelerating work style reforms and securing, nurturing, and allocating diverse humanresources in line with our business strategy. Moreover, as stipulated in Multi-Stakeholder
Policy, we are committed to human capital investment and sustainably giving back tothem.

Measure for Phase 3:
Accelerate Work Style Reforms• Continuation of the Smile Project,
led by top management

Foundation of Sustainability Management

Basic Philosophy• A cceleration of diversity
Indicator

Target (April 2026)
Actual results for April 2023*1
in Parentheses

Ratio ofwomen inmanagerial
positions

16.4% (15.5%)

Ratio ofnon-Japaneseemployees

3.0% (2.5%)

Ratio offemaleemployees

1.7% (1.2%)

Indicators and Targets for Company
Environment Improvement
Scope: Non-consolidated
Indicator

Targets (FY2025) Results for
FY2022 in Parentheses

Employeesatisfaction
surveyMaintaining the ratio of
respondents who wantto keep working for theGroup at 90% or more*2

Rate ofMale: 50% (10.7%*3 )childcare leave Female: 100% (100%)
taken
*1 A
 ggregated on a different date from that for the
Employee Data on page 70.
*2 N ot conducted in FY2022. The FY2021 response
rate was 91.6%.
*3 4 4.6% of the Company’s own leave programs.

SANKI REPORT 2023

65︱

SocialFoundation of Sustainability Management ︱Human Resources

Ensuring Diversity in Human Resources and Promoting Careers⨋ R especting Diversity in Employment and Recruiting High-Level Human

Resources⨋ S ecuring Human Resources through the Return to Career Program

All workers

60.8

61.0

Regular workers*2

59.8

60.7

Part-time/fixed-term workers

51.8

50.9

⨋ C areer Change System

In 2019, we established new career types, namely the career-track position andoperational position, and introduced a system that allows employees to switch
between these career paths. Job relocation is excluded from the requirements for the
career-track position, and the system is designed to enable a wider range of employees
to thrive. In fiscal 2022 , four employees changed their career type for a work style that
better suits their particular stage in life.
⨋ Creating Workplaces for Persons with Disabilities

We continue to hire persons with disabilities and are working to create an environment
in which they can work comfortably over long periods. As of June 2022, theemployment ratios of persons with disabilities were 2.24% and 1.51% on a nonconsolidated and consolidated basis, respectively. As of June 2023, the employment
ratio of persons with disabilities was 2.28% on a non-consolidated basis. In recruiting,
we expanded our channels and at the same time matched applicants with eachdepartment and provided care upon acceptance.
⨋ Extension of Retirement Age and Post-Retirement Reemployment System

We have extended the retirement age to 65 as of April 2022. In conjunction with
the introduction of an optional retirement age system, employees will receive full66

SANKI REPORT 2023

Goals

Results in
FY2022*3

1. I ncrease the average
length of service forwomen by 10% ormore from April 2021

14.3 years(5.9% increase)

2. R aise the ratio of
women in managerial
positions*4 to theconstruction industry
average of 3%

2.5 %(1.6 percentage
point increase)

Our personnel system ensures equal opportunity as well as fair evaluation and treatment for
all employees while supporting employee initiatives for self-directed career development.
Individual interviews and a mentor system are introduced for younger employees.
Once a year, all employees fill in a Career Development Sheet and receive feedback
through an interview with their supervisors. To collect their opinions, we have anothersystem that allows employees to bypass their superiors and speak directly with the
Human Resources Department depending on the content of the sheet. Moreover, wehave several employee award programs, including the president’s commendation forboosting our technological capabilities and raising employee motivation, such as theBest Employee Award, Yano Technology Prize, and Award for Construction Method/
Operation Improvement, as well as other programs including long service awards (25and 50 years).

We maintain training systems associated with each career path, such as management
training, technical training, and training by field of expertise, in order to strengthen
specialized, technical, and management skills. We take advantage of the Sanki Technology
Center to conduct various training programs.

• Problem-solving seminars and opinion
exchange sessions for employees whoare hearing impaired• M anagement training to promote
understanding among managers• I nstalling lamps in all offices thatbear evacuation instructions forhearing-impaired employees in theevent of a disaster• Providing closed captioned
presentations during Web-based
training and financial results briefings

Mid-Career Employees

New employee training
Management Training• M entor system

Smile Work Guideline (Human
Resource Development
Guideline)

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

Awarding long years of service (25th year)

Executives

Leadership position training

Second-year training

Management candidate
training

Fourth-year training

Section chief training

Seventh-year training

Department manager training

New employee training
Qualification training

Safety Training

Safety experiential training
Corporate ethics training

Corporate Ethics Training

Mid-career staff training
Qualification training
Technical experiential training％

Improvement of Workplace
Environment• I ndividual interviews by
personnel managers in the thirdand fifth year of service▍Training Systems

Employment rate of persons with disabilities(non-consolidated) as of June 1, 2023

2.28

Governance⨋ E ducation and Training Systems

Younger Employees*1 Calculated in accordance with a provision
stipulated in the Act on the Promotion of
Women’s Active Engagement in Professional Life.
*2 Includes operational positions.
*3 A s of April 1, 2023. In the parentheses arechanges from April 1, 2021.
*4 A
 ggregated on a different date from that of thenumber of managers referred to on page 70.

SocialHuman Resources

Gender wage
gap

（%）

Consolidated

Action Plan Based on the Act ofPromotion of Women’s Participation
and Advancement in the Workplace
Plan period: April 1, 2021 toMarch 31, 2026
Scope: Non-consolidated

Environment

Personnel Systems Designed forYounger Employees⨋ Personnel System for Workplaces Where People Can Grow

https://positive-ryouritsu.mhlw.go.jp/(Japanese only)G

retirement benefits from age 60 to 65, even if they retire at their own request. In
addition to improving the treatment of those about to retire, we are doing the same forthose who are rehired under the reemployment system. Employees may also choose
to be reemployed between the ages of 60 and 65. In fiscal 2022, we reemployed 172
retired employees on a consolidated basis.

Developing and Evaluating Human Resources

Website on the Promotion of
Women’s Active Engagement inProfessional Life and Support for theirWork-Life Balance (Ministry of Health,Labour and Welfare of Japan)

S

Social⨋ P romoting Women’s Careers

We formulated an action plan based on the Act of Promotion of Women’s Participation andAdvancement in the Workplace to create an environment in which our female employees
can continuously develop their careers and have since implemented related measures. Our
wages and promotion opportunities to managerial positions are solely based on employeecompetence or performance as fairly evaluated free from gender-based discrimination.
Non-consolidated

128 people from 9 countries(male: 101, female: 27)

Employees of Thai Sanki Engineering

To increase the diversity our working environment and more flexibly accommodate careerdevelopment, we changed part of our Return to Job program and renamed it as Return
to Career. The revised program, launched in October 2022, allows voluntarily retired
employees to return to work and significantly relaxes other restrictions.

▍Gender Wage Gap (FY2022)*1

The U.K., Thailand, Vietnam,
Peru, Russia, South Korea, China,
Austria, and Malaysia

E

Foundation of Sustainability Management

We seek to bring on board human resources that differ in gender and nationality as
well as in talent and personality. Staff from the sales, design, technology, and otherdivisions join the Human Resources Department to ensure fairness based on multiple
perspectives. Hiring criteria for fiscal 2022 were based on findings from interviews with thepresident, officers in charge, and the managers of direct departments to continuously andproactively hire people from a wide variety of backgrounds.
As of the end of March 2023, there were 184 mid-career hires in managerial positions (on aconsolidated basis). In fiscal 2022, we introduced an exclusive hire contract system for R&D andother jobs requiring high-level expertise to secure correspondingly high-level human resources.

Number of Non-Japanese Employees(as of March 31, 2023) (Consolidated)

Facilities
Construction
Technical Training︱

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

Plants & Machinery
Systems

New employee training
Inspector education
Training on our products and systems
ISO 9001/ISO 14001

Quality & Environment
System Training

New employee training
Mid-career staff training

Education to developinternal auditors

Average education and training
costs per employee in FY2022(consolidated)

55,000yen/year

SANKI REPORT 2023

67

︱Foundation of Sustainability Management ︱Social︱Human Resources

Employee Engagement⨋ Q uestionnaire on the Working Environment and Individual

Interviews

Results of a Questionnaire Survey
on the Working Environment
Survey period: 2021
Participants: all Group employees
Q Do you think that the SankiEngineering Group’s business iscontributing to society?
Yes

98.6%

⨋ P romoting Work-Life Balance⨋ Century Communication Up Discussion Events

Since fiscal 2016, we have been holding Century Communication Up (CCU) discussion
events in accordance with the Century 2025 long-term vision. Opinions and proposals
obtained through the CCU have been applied to improving our operations andsystems. In April 2022, we organized a new employee CCU to provide an opportunity
for face-to-face dialogue between new employees and executive officers.
⨋ S ound Employer-Employee Relationships

Sanki Engineering launched the Company-wide Smile Project, led by the president, in
fiscal 2015 to promote work style reform. We have been implementing initiatives acrossthe Company to create a better working environment. In fiscal 2017, we set up the Smile
Site Plan, a committee dedicated to construction sites. In addition, we worked on efforts
to lessen the operational load of construction managers and enhance capabilities andquality at our construction sites. In fiscal 2020, we launched the Smile Plan, consistingof four subcommittees, to establish a system that enables all departments to work
together as one. Moreover, under the Medium-Term Management Plan “Century 2025”
Phase 3, a KPI is set up to eliminate overtime work exceeding the limit stipulated in
the revised Labor Standards Act. As a result of these efforts, we were rated 3 on a scaleof 5 stars in the 6th NIKKEI Smart Work Management Survey, which selects advanced
companies that challenge the productivity revolution through work style reform.

68

SANKI REPORT 2023

GovernanceStretching class at Sanki Techno Center

FY2022 rate of paid leave taken(consolidated)

61.6
27.4

％

Average monthly overtime work
per person (consolidated)

hours

Childcare by the City of Nagoya
New employee CCU with executive officers

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

The Kurumin markfor support ofraising nextgeneration children

City of Nagoya
certification
for companies
supporting childcare▍Major Programs Supporting Work-Life Balance (Non-consolidated) (as of April 2023)
Certified as 3 stars in the NIKKEI Smart WorkManagement Survey

Area• R aise efficiency by introducing acloud-based accounting system

P. 56
Initiatives for Ensuring Quality at
Construction Sites

Work

Half day/hourly off

Paid leave for half a day or by the hour.

Anniversary leave

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

Sanki Smile Day

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

Reserved leave

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

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

Sliding work hours

Employees can slide the start and end times forward or back for business or non-business reasons insofar as this does notinterfere with their work.

Return to Career program

Employees who have left the Company for unavoidable reasons can apply for reinstatement.

Childcare leave

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

Nursing leave

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

ChildcareandShortened work hours
nursing
care
Support for childcare leave and
Health & Productivity Management
Organization 2023

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

Consecutive leave for construction Three consecutive days of leave after staying at a construction site for more than six months or before moving tomanagers
another site.

• Clarify work responsibilities byreviewing the personnel system• Follow up with employees who work
long hours based on stress check
results

ProgramRefresh leave

Major Initiatives of the Smile Project⨋ M easures on Health and Productivity Management

Understanding that reducing long hours of work is a primary consideration for
managing employee health and productivity, we engage in activities for maintaining
and improving employee well-being in tandem with other work style reforms. Apartfrom measures for reducing workloads and raising productivity, we carry out healthimprovement activities, conduct periodic stress checkups and identify the sources ofSocial⨋ Acquiring the Kurumin Mark and Recognition for Supporting

Promoting Work Style Reform⨋ P romoting the Smile Project

Environment

Human Resources

We consider labor-management dialogues as a key channel to invest in humanresources and continuously improve employee treatment. The Human Resources
Department and employees union at Sanki Engineering meet monthly to discuss
improvements in the working environment and operation of Company systems.
Also, we provide the employees union with opportunities to present their proposals
or requests to management and have been implementing measures based on the
dialogues. For instance, we held labor-management exchanges in order to discuss anddetermine the fiscal 2022 wage increases.

G

SocialWe have been augmenting our programs in response to employee requests forbroad support of a healthy balance of work and personal life so both male and female
employees can continue to work with a sense of security while attending to various life
events. In addition, we are promoting improvement of the environment that enables
flexible work styles by reviewing our work and leave programs.
In fiscal 2022, we reviewed our Return to Job program and also conducted an
online seminar and individual consultation on nursing care for employees across Japan.
Furthermore, we introduced a new rule to expand the options of our postpartum
paternity leave in response to revisions to the Act on Childcare Leave and Caregiver
Leave, thereby allowing employees on paternity leave to work for a certain period oftime even during the leave at their request.

S

Foundation of Sustainability Management

We gather opinions from employees about their workplace through a periodic
questionnaire along with another questionnaire conducted by employees union, andwe refer to their comments while creating a better working environment.
In fiscal 2022, prior to the launch of the revised personnel system, the Human
Resources Department conducted individual face-to-face interviews with generalmanagers and managers, seeking their opinions about the personnel system. We
continue to maintain direct dialogue with employees to deepen mutual understanding
and use their feedback to design personnel systems and training programs.

stress through third-party assessment, provide employees with industrial physician
advice for improving their life-style habits, and implement health-related campaigns
using a pedometer app as well as other projects. Moreover, a 24-hour toll-free healthconsultation service is in place to offer advice on health, medical, nursing, and childcare
issues for employees and their families. The service was set up outside the Company,
and caller privacy is strictly protected.
We have been certified as a Health & Productivity Organization 2023 (Large
Enterprise Category) in recognition of those efforts, by the Ministry of Economy, Tradeand Industry and Nippon Kenko Kaigi.

E

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

reinstatement

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

Special childcare/nursing leave

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

Postpartum paternity leave

Those on paternity leave can work during the leave only if they have requested to do so and with Company permission.

SANKI REPORT 2023

69

︱

︱ Social
人財Foundation of Sustainability Management ︱

E

S

G

Environment

SocialGovernance

Local Communities▍Number of Employees on Leave and Work Hours
FY2019FY2020

FY2021

Male Female Total

Male Female Total

Male Female Total

7

11

18

9

27

36

7

9

–

–

16

7

24

–

–

–

FY2022
Male

Female103242

7 (26)

34

9

30

39

–

–

–

–

7

33

40

31

7

27

–

–

–

Basic Philosophy

Total

13

20 (39)6 (25)

12

18 (37)

43.3

100.0

53.4

–

–

–

–

–

–

–

–

–

–

–

–

44.6

100.0

54.4

100.0

88.9

93.8

100

96.3

97.2

100.0

100.0

100.0

100

93.8

95.2

100.0

100.0

100.0

100.0

88.9

93.8

100

100

100

100.0

100.0

100.0

100

100

100

100.0

100.0

100.0

1

0

1

1

1

2

0

0

0

0

0

0

1

0

1

0

0

0

0

0

0

0

0

0

0

0

0

1

0

1

54.0

76.1

57.1

54.3

76.3

57.4

53.4

67.1

55.3

53.2

69.7

55.6

58.8

77.9

61.6

53.0

74.2

55.9

51.9

74.4

55.1

52.5

65.8

54.5

52.4

69.5

55.0

58.2

77.9

–

–

–

37.4

14.7

34.3

31.7

12.3

29.0

31.7

11.8

29.6

30.0

12.4

61.4
27.4

35.0

14.7

32.0

34.5

13.6

31.3

33.0

13.3

29.9

33.0

12.8

29.7

31.6

13.7

28.8

▍Employee Data (as of March 31 of Each Fiscal Year)FY2022FY2018FY2019FY2020

FY2021

Male Female Total

Male Female Total

Male Female Total

Male

Female

Total

2,072

322

2,394

2,152

349

2,501

2,190

358

2,548

2,226

381

2,607

2,244

383

2,627

1,694

273

1,967

1,705

287

1,992

1,740

308

2,048

1,770

326

2,096

1,753

320

2,073

–

–

–

–

–

–

91

22

113

84

25

109

101

27

128

–

–

–

–

–

–

17

6

23

19

5

24

20

5

25

⨋ Cleanup and Environmental Beautification Activities

630

7

637

676

9

685

683

11

694

672

13

685

687

18

705

Number ofmanagers*3

556

5

561

556

5

561

567

7

574

567

9

576

580

14

594

Average age*2
Average years ofservice*2

44.5

38.2

43.7

44.7

38.3

43.8

44.7

38.8

43.8

44.7

39.0

43.9

43.8

39.2

43.1

43.9

37.1

43.0

44.1

37.6

43.2

44.2

38.0

43.2

44.2

38.2

43.2

43.0

38.3

42.3

17.3

13.0

16.7

17.3

12.9

16.7

17.5

13.2

16.9

17.6

13.3

17.0

16.7

13.6

16.2

19.0

13.9

18.3

19.3

14.1

18.5

19.4

14.0

18.6

19.5

14.2

18.6

18.5

14.7

17.9

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 municipal governments. On a Group-widebasis, we carried out activities in 42 local communicates in fiscal 2022. The Group’s
presidents also actively participate in events and encourage greater turnouts for
local cleanups.

–

–

–

70

15

85

73

18

91

79

20

99

82

6

88

⨋ Welcoming Study Tours to the Safety Experience Area and Other Training

71

9

80

67

15

82

70

18

88

76

19

95

78

5

83

–

–

–

32

13

45

26

13

39

25

12

37

30

3

33

Employment

Consolidated
Nonconsolidated
Consolidated
Nonconsolidated
Consolidated
Nonconsolidated
Consolidated
Nonconsolidated
Consolidated
Nonconsolidated

Number of new
recruits
Number of
mid-career hires
Number of rehired
employees after
retirement
Rate of persons
with disabilities*4(%)
Turnover rate
due to personalreasons*5 (%)

4

2

6

7

8

15

5

9

14

5

3

8

5

0

5

223

9

232

229

11

240

212

12

224

216

10

226

165

7

172

161

5

166

169

8

177

173

9

182

176

10

186

124

6

130

–

–

1.89

–

–

1.94

–

–

1.77

–

–

1.82

–

–

1.51

–

–

1.93

–

–

1.97

–

–

1.99

–

–

2.10

–

–

2.24

–

–

–

–

–

–

1.7

2.2

1.8

2.4

3.5

2.6

2.0

3.1

2.2

–

–

–

–

–

–

1.5

1.6

1.5

1.7

2.3

1.8

1.7

2.7

1.9

*1 The numbers in parentheses for childcare leave, the male rate of childcare leave taken, and the total for childcare leave taken in fiscal 2022 are calculated by including theCompany’s own leave programs.
*2 The figure for FY2021 was retrospectively revised.
*3 The figures for the years from FY2018 to FY2021 were retrospectively revised due to a change in the aggregation method under the revised personnel system.
*4 As of June 1 of each fiscal year.
*5 Ratio of retired employees to all employees in each fiscal year.

▍Employees by Age (as of March 31, 2023)
10s

20s

30s

40s

50s

60s

70s

Male Female Total Male Female Total Male Female Total Male Female Total Male Female Total Male Female Total Male Female Total

70

Total

Consolidated

8

0

8

404

97

501

468

111

579

492

94

586

631

65

696

232

16

248

9

0

9

2,627

Nonconsolidated

8

0

8

354

87

441

384

100

484

344

72

416

490

51

541

171

10

181

2

0

2

2,073

SANKI REPORT 2023

Disaster-preparedness wellLocal Communities

Number of
non-Japaneseemployees⨋ Agreement for the Provision of Facilities in Times of Disaster

Sanki Engineering has concluded an agreement with Yamato City in Kanagawa
Prefecture to provide a temporary shelter for those unable to return home in thewake of a disaster. Under the agreement, Sanki Techno Center will, in the eventof an earthquake or other calamity, serve as a base of operations for local disasterprevention and emergency firefighting teams, and the Company will work to
restore facilities for water supply and sewage in Yamato City.
In fiscal 2022, we constructed a water well to ensure the supply of potablewater for neighborhood residents in the event of a disaster until water supply andsewerage systems are restored. The well is registered as Yamato City’s disaster
preparedness well.

SocialConsolidated
Nonconsolidated
Consolidated
Nonconsolidated
Consolidated
Nonconsolidated
Consolidated
Nonconsolidated
Consolidated
Nonconsolidated

Initiatives for Co-Existing with Local Communities

Male Female Total
Employees
Number of
employees

As stated in the Sanki Engineering Group Code of Conduct and Action Guidelines, “We seek to contribute to society
in order to aid in the development of local communities as a good corporate citizen and member of society,” and ouractivities reflect this principle. We will maintain active communication and continue to help with the development of thelocal communities where we operate.

Foundation of Sustainability Management

Consolidated
Childcare leave*1
Nonconsolidated
Consolidated
Rate of childcare
Nonleave taken*1 (%)
consolidated
Consolidated
Reinstatement after
Nonchildcare leave (%)
consolidated
Consolidated
Nursing leaveNon(people)
consolidated
Consolidated
Rate of paid leave
Nontaken (%)
consolidated
Consolidated
Average monthly
overtime work*2
Non(hours per person)
consolidated

FY2018
Male Female Total

Ocean cleanup in Hokkaido

Facilities
The Sanki Techno Center welcomes study tours from government agencies,
schools, and businesses to its Safety Experience area and other training facilities
at the Techno Plaza. The Safety Experience area, which opened in fiscal 2019, gives
visitors a first-hand visual experience of hazardous construction works. In fiscal
2022, 652 people visited the facility for a cumulative total of 4,336.

Supporting the Development of the Next Generation

Receiving study visitors at the
Sanki Techno Center⨋ Opening the Sanki Environmental Garden to the Local Public

The Sanki Environmental Garden, adjacent to the Sanki Techno Center, is open
round the clock to members of the local community, providing a place to play formany children from neighboring daycare centers. In March 2023, the total numberof visitors reached approximately 50,000. We expect that the Sanki Environmental
Garden will continue to be used by the community as a place to relax, and tonurture the next generation over the long term.
⨋ Sanki Kankyo Service Welcomes Social Studies Tours by Local Schools

Spot-billed ducks at the Sanki Environmental
GardenOur Group company Sanki Kankyo Service actively invites elementary school
children for field trips at its offices. In fiscal 2022, 70 children from four elementary

SANKI REPORT 2023

71︱Foundation of Sustainability Management ︱︱ Social
地域社会

E

S

G

Environment

SocialGovernance︱

GovernanceFoundation of Sustainability Management ︱Corporate Governanceschools in Hokkaido visited the offices and learned about the role and workings ofthe sewerage system. The company also helped some junior-high schools provide
work experience for students in their social studies class.

Basic Philosophy⨋ Sponsoring the Chikyu Kyoshitsu Environmental Education ProjectIn 2022, we participated as a special sponsor in Chikyu Kyoshitsu, an environmental
education project hosted by The Asahi Shimbun Company for elementary andjunior-high school children. In addition to serving as a teacher in the One-Day
School on the Environment for some 80 elementary school children and 200
online participants across Japan, we visited elementary schools in Okinawa andKumamoto prefectures. Under the title “Thinking about Comfortable Living andEnergy Efficiency,” the visiting lessons were provided for 109 students to raiseawareness about global environmental conservation through examples of theeveryday comforts associated with air, water, and electricity.

Sanki Engineering Corporate Governance Guidelines (revised on June 27, 2022)

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

Corporate Governance System⨋ Institutional Design

Other Services to Society⨋ Support for Sports Promotion and Revitalization

Yamato Sylphid on Sanki Match Day

We extend donations to universities and research institutes and sponsor culturalactivities, including those by the Japan Symphony Foundation and the Kokoro no
Gekijo (theater of the heart) project by the Shiki Theater Company . In addition, we
support nature conservation activities in developing countries in the Asia-Pacificand other regions, collect donations for training guide dogs, and encourage
our employees to donate blood on an ongoing basis. We also help with MitsuiGroup social contribution activities through our support for the Mitsui Volunteer
Network, which promotes the voluntary efforts of former employees of MitsuiGroup companies.

▍Status of Directors and Officers (as of June 23, 2023)
Number of Persons
Chairperson of the Board of Directors

External director

Directors (women)

11 (1)

External directors (independent directors)
Japan Deaf Rugby Team at the WorldChampionship 2023

5 (5)Executive officers (women)

35 (0)

Those also serving as directors⨋ Earthquake Reconstruction Project• Provided a lunch menu featuring ingredientssourced from the Tohoku region at the Sanki
Techno Center cafeteria• Purchased products from a gift catalog
supporting the affected areas, in collaboration
with the employees union

72

SANKI REPORT 2023

5 (0)External auditors (independent auditors)

3 (3)▍Frequency of Major Meetings (FY2022)
Meeting

Visiting an earthquake-stricken area

• Co-sponsored a Tsugaru Shamisen competition• Paid our seventh visit to affected areas• L aunched a permanent exhibit onreconstruction following the earthquake

4

Auditors (women)

We launched the Earthquake Reconstruction Project in May 2012, a year after theGreat East Japan Earthquake, as a Company-wide action team for contributing to
the early recovery of the affected areas. Since then, we have conducted various
activities each year to support the reconstruction effort, prevent memories of thedisaster from fading, dispel harmful rumors, and share information on disasterprevention and mitigation.
▍Activities in Fiscal 2022

https://www.sanki.co.jp/corporate/
governance/report.html

Corporate Governance⨋ Donations and Contributions

Corporate Governance
Report (in Japanese)

Governance

We are an official sponsor of Yamato Sylphid, a women’s soccer team in Yamato
City. We also sponsor the non-profit organization Japan Deaf Rugby Football
Union (Deaf Rugby), Japan Handball Association, and East Hokkaido Cranes, an ice
hockey team in Kushiro City, Hokkaido Prefecture. By supporting these sports, we
continue to contribute to the revitalization of local communities.

We adopted a Company with Board of Company Auditors system with dedicated,
full-time auditors as our form of corporate governance. Under this structure, theauditors and the Board of Auditors exercise oversight over the execution of duties
by directors, the accounting auditors auditing the financial statements and otherdocuments as well as the Board of Directors responsible for making decisions onmaterial 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 and supervisory functions, and the executive
officers responsible for the execution of business affairs.

Foundation of Sustainability Management

We established the Sanki Engineering Corporate Governance Guidelines to clarify the Sanki Engineering Group’s basic
philosophy and policy on corporate governance. Once a year, we review the status of our compliance with the Corporate
Governance Code and revise it as needed. We are also taking appropriate action to comply with revisions made to
the Corporate Governance Code in June 2021, and while maintaining the standards set by the Tokyo Stock Exchange
Prime Market and making improvements, we will continuously strive to achieve sustainable growth for the Group andstrengthen its corporate value over the medium to long term.

Average Attendance ofExternal Officers

Frequency

Board of Directors

13*1

99.0%

Board of Auditors

8*2

100%

Advisory Committee on Nomination
and Remuneration

4*3

100%

Management Meeting30

96.7%*4*1 M s. Tamami Umeda was appointed
external director, and Mr. Kunihiko
Tachi was appointed auditor of SankiEngineering in June 2022 and they
have therefore attended 11 out of 11
meetings.
*2 M r. Kunihiko Tachi was appointed
auditor of Sanki Engineering in June
2022 and has therefore attended 6
out of 6 meetings.
*3 M s. Tamami Umeda was appointed
external director of Sanki Engineeringin June 2022 and has therefore
attended 2 out of 2 meetings.
*4 A ttended only by the chair of theBoard of Directors (full-time external).

SANKI REPORT 2023

73

︱

GovernanceFoundation of Sustainability Management ︱︱Corporate Governance

Board of Directors

Exchange of opinions,establishing common awarenessLiaison Meeting of External
Officers
5 external directors
3 external auditors

Accounting Auditors

11 directors* including
5 external directors
Consultation

Appointment/
Dismissal(Ernst & Young ShinNihon LLC)

Discussion
and reporting

Internal Finance Control
Committee

President

Management Meeting
Discussion, andreporting onimportant matters

ReportingExecutive officers
Leadership and supervision

Auditing

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

Risk Management Committee

The board consists of directors and is currently chaired by an external
director. It meets at least once a month to decide on important mattersand supervise the status of execution of business affairs.

The committee consists of members of the Management Meetingand chairpersons of subcommittees, appointed by the executive
officer in charge of risk management, and the head of the Internal
Audit Office. Currently, the executive officer in charge of risk
management is the president. The committee meets four times ayear and oversees risk management for the entire Group.

Board of Company Auditors
The board consists of auditors, by and from whom a chairperson is
selected. In principle, it meets at least eight times a year to monitor
the status of governance and audits the execution of duties bydirectors as an independent body entrusted by shareholders.
Members attend board and other important meetings, review thestatus of operations and assets, and maintain close contact with theaccounting auditors, Internal Audit Office, and Accounting Division. A
supplementary external auditor has been appointed to fill any future
external auditor vacancies.
Internal Audit Office

Executive Officer Committee
Consisting of executive officers and presidents of the Group
companies, the committee meets at least four times a year tocommunicate the policies expressed by the president and executive
officers responsible for departments, report on the status ofbusiness execution by each executive officer and Group company
president, and discuss initiatives for achieving the medium-term
management plan.

Supplementary
Principle 3-1.3
Supplementary
Principle 4-1.1

Principle 4-9

Guideline*1

Report *2

Article 10

P. 22

Article 9
Article 18

P. 22

Article 14

P. 23

Article 16

P. 23

Article 32 PP. 24-25
PP. 1,
24–25
PP. 7–8,
9, 24–26(ii) Basic views and guidelines on corporate governance

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

Article 31(iv) P olicies and procedures for selecting or dismissing executive
managers, and nominating directors and candidates for auditors

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

PP. 9,
24–26(v) Reasons for selecting or dismissing individual executive managers,
and reasons for nominating individual directors and auditors

Article 23

PP. 3-4, 6

Initiatives on the sustainability of the Company

Article 13 PP. 27-28

Overview of the scope of matters delegated to management

Article 18

Independence standards for external officers

Basic policy on the independent composition of committees fornomination and remuneration, their authority and roles, and otherrelated matters
Supplementary Basic policy on balancing the overall knowledge represented by the
Board of Directors, diversity, and scope, and policies and procedures
Principle 4-11.1
for combining and selecting the skills and other qualities of directors
Supplementary Current status of concurrent positions held at other listed companies
Principle 4-11-2 by directors and auditors
Supplementary Overview of analysis and evaluation results of the board’s
Principle 4-11-3 effectivenessSupplementary
Principle 4-10.1

PP. 9,
28-29(Appendix)
Independence
standards PP. 29-30
for external
officers
Article 24

PP. 4-5, 8,30

Article 19

P. 31

Article 26

PP. 3–4,
6, 32

Article 29 PP. 32–33

Supplementary
Principle 4-14-2

Training policy for directors and auditors

Article 30 PP. 32, 34

Principle 5-1

Policies on systems and initiatives for promoting constructive
dialogue with shareholders

Article 32 PP. 10, 34

The department conducts internal audits of the execution ofoperations by business execution departments in accordance with the
Auditing Plan for that fiscal year. It verifies the internal management
system including its appropriateness and efficiency. As necessary, it
exchanges opinions with the Accounting Division and makes proposals
concerning improvements or the correction of a problem. The
department also reports the results of its audits to the president andauditors.

Corporate Ethics Committee

Advisory Committee on Nomination and Remuneration

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

Diversity of Board of
Directors• Appointed one female external director

Discussion for promoting
the Medium-Term
Management Plan Phase 3• Pursued medium- to long-term human resource development, including
promotion of women and utilization of senior human resources, as a key
management strategy

Sustainability Committee

Enhancement of training
for directors and auditors• Provided opportunities to participate in external seminars and visit
construction sites and corporate bases, made further enhancements

Verification of risk
management system• Exchanged opinions during a meeting of the Board of Directors on
selected topics for verification, in addition to issues identified by theeffectiveness assessment• Discussed verification of the risk management system by the Board of
Directors

The committee is chaired by an external director and consists solely of
external directors. It meets as needed to deliberate on the nominationof candidates for directors and the system of remuneration.
Management Meeting
The meeting consists of directors and executive officers nominatedby the president and, in principle, meets twice a month. As a decisionmaking body for fundamental and key matters related to the executionof business affairs, the meeting deliberates and makes decisions fromthe standpoint of overall management.

SANKI REPORT 2023

The committee consists of the chairperson, president, and executive
officers, and is chaired by the president. The executive officers
responsible for corporate ethics and nominated by the president
oversee all matters related to corporate ethics. The committee meets
twice a year to deliberate on implementation plans for the pervasionand observance of the Code of Conduct and Action Guidelines.
Internal Finance Control Committee

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

*1 C ompany’s Corporate Governance
Guidelines*2 C ompany’s Corporate Governance
Report (June 27, 2023)

Sanki Engineering Corporate
Governance Guidelines

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

Corporate Governance

Board of Directors

Principle
Policies on cross-shareholdings and concrete standards forexercising voting rights
Procedures for preventing conflicts of interest with regard totransactions between related parties
Current status and targets for ensuring diversity with regard toassignments and other treatment of core personnel
Details of efforts in terms of personnel and management tofulfill functions as the owner of corporate pension assets, andmanagement of conflicts of interest(i) The Company’s aspirations (business principles), businessstrategies, and business plans

Principle 3-1

Internal Audit Office*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.

74

Governance

GovernanceMonitoring, guidance, support, and education

Principle 2-6

Election, dismissal,
and supervision

Sustainability Committee

Policy Meeting

Principle 1-4

Supplementary
Principle 2-4.1

Advisory Committee on
Nomination andRemuneration

Appointment/Dismissal

Leadership andsupervisionCorporate Ethics Committee

Social▍Principle Requiring Disclosure of Certain Matters (Tokyo Stock Exchange)

Principle 1-7

Reporting

Reporting

Risk Management Committee
Executive Officer Committee

Accounting auditing

1*2(one substitute auditor)

Environment

Foundation of Sustainability Management

Appointment/Dismissal

Business auditing
Accounting auditing

5 auditors including
3 external auditors

G

We disclose information in accordance with each principle of the Corporate
Governance Code, as follows.

General Shareholders’ Meeting

Board of Company Auditors

S⨋ Disclosure Based on Principles of the Corporate Governance Code▍Corporate Governance System (as of June 23, 2023)

Appointment/
Dismissal

E

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.
▍Major Initiatives in FY2022 (Addressing Issues Identified in FY2021)

SANKI REPORT 2023

75

︱Foundation of Sustainability Management ︱Governance︱Corporate Governance

External
Director• Evaluation items(1) Composition, responsibilities, and management of the Board of Directors(2) Effective use of effectiveness assessment(3) Risk management(4) Effectiveness of Advisory Committee on Nomination and Remuneration

2. Discussion by the Board of Directors• Results of individual interviews and third-party evaluation were reported at
the Board of Directors meeting• Held discussions on identified issues and future initiatives
External
Auditors• E ffectiveness of management of particularly important risks was discussed at
Board of Director meetings, with the participation of related sections
2. Discussions by the Board of Directors• D iscussed medium- to long-term management strategies• T opics to be discussed(1) Issues related to digital reform and medium-term initiatives(2) Discussion on securing, nurturing, and utilizing human resources(3) Discussion on growth investment(4) Management with due consideration of capital costs and share price(5) Ideal R&D structure, and other themes

Years
ServedReasons for Selection

Yukiteru
Yamamoto

●

9
years

Mr. Yukiteru Yamamoto has served in positions including representative director and president of Mitsui Life
Insurance Company Limited (currently Taiju Life Insurance Company Limited) and executive member of the Policy
Board of the Japan Business Federation. He thus possesses abundant operational experience and broad knowledge
regarding corporate management. The Company selected Mr. Yamamoto as an external director for his experienceand insight developed through this background.

Kazuhiko
Kashikura

●

5
years

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

Keiji
Kono

●

2
years

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

AkihikoMatsuda

●

2
years

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

Tamami
Umeda

●

1
year

Ms. Tamami Umeda is a licensed physician and has held positions such as director-general counsellor, Ministryof Health, Labour and Welfare, and director-general, Environmental Health Department, Ministry of theEnvironment, and she thus has abundant experience and broad insight on domestic and international public healthadministration and hygiene and organizational management. The Company selected Ms. Umeda as an external
director for her experience and insight developed through this background.

Shozo
Fujita●5
years

Mr. Shozo Fujita has served as a public prosecutor and attorney-at-law, as representative director and president of
the Resolution and Collection Corporation, and as a director who serves as an audit and supervisory board member
at other companies. He thus possesses abundant experience and broad insight. The Company selected Mr. Fujita as
an external auditor for his experience and insight developed through his background to audit the Company.

Yutaka
Atomi

●

4
years

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

ToshiakiEgashira

●

4
years

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

Name▍Skills, Careers, and Expertise*1 of Members of the Board of Directors and Board of Auditors (16 Persons)⨋ Training for Directors and Auditors

We conduct periodic training as part of our efforts to enhance the knowledge of ourofficers. In fiscal 2022, we particularly focused on visits to construction sites and the
Sanki Techno Center, a comprehensive training and research facility, to deepen theunderstanding of external officers of the Group’s business activities.

SANKI REPORT 2023

Governance

Site inspection by external officers

Independence Standards forExternal Officers(Appendix to the SankiEngineering Corporate
Governance Guidelines)

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

Field

Number of Directors andAuditors(External Directors andExternal Auditors)

Management
experience*2

8 (6)Finance and capital
markets

6 (4)Engineering

6 (1)Risk management

5 (2)

R&D

1 (0)

Governance

5 (2)Overseas operations

3 (1)

Law

1 (1)

Field

Number of Directors andAuditors(External Directors andExternal Auditors)

Corporate Governance

1. Revision of risk management system•C onsidered revising the deliberation method of the Risk Management
Committee

76

SocialGovernance• Results
Self-assessment scores increased in many items compared to the previous
year. Third-party evaluation also showed that the effectiveness of the Boardof Directors had steadily improved under the chair served by an external
director.

⨋ Appointment of Directors and Independence of External Officers

Environment

Foundation of Sustainability Management

1. Individual officers were interviewed and evaluated by a third party• All directors and auditors were individually interviewed by a third party, andthe results were analyzed and evaluated

We identified the skills we expect members of the Board of Directors to demonstratein light of the management strategy, and the Board of Directors is composed of diverse
members to ensure that all these skills are covered. At least one-third of the members
are independent external directors.
The Advisory Committee on Nomination and Remuneration considers candidates
for directors and submits the results to the Board of Directors for deliberation, while
the nomination of candidates for auditors is deliberated by the Board of Directors after
obtaining the prior consent of the Board of Company Auditors. Appointments are
finalized by a resolution at the general shareholders’ meeting. We have establishedstandards on the independence of external officers to raise the objectivity of theiroversight of management.

G

Independent
Officer

Position▍Overview of Effectiveness Assessment for FY2022

Futureinitiatives

S▍External Officers’ Terms in Office and Reasons for Selection⨋ Assessing the Effectiveness of the Board of Directors

Once a year, the Board of Directors is given the opportunity to verify its process
for deliberating proposals and identifying areas for improvement, to analyze andevaluate the effectiveness of the Board of Directors as a whole and to use the resultsfor improvements. In principle, this is done through a questionnaire, while once every
three years we conduct interviews with individual officers instead of a questionnaire.
Interviews were conducted in fiscal 2022, and a third-party evaluation confirmed thatthe effectiveness of the Board of Directors was being ensured.

Content

E*1 T wo to three fields of particularstrength were selected.
*2 Experience as head of anorganization, such as chairperson orpresident of a company, chairpersonof an organization, or president of auniversity.

⨋ Officer Remuneration

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

SANKI REPORT 2023

77︱Foundation of Sustainability Management ︱︱GovernanceCorporate Governance▍Elements and Procedures for Remuneration for Directors and Auditors (as of June 23, 2023)
Fixed
Remuneration

Bonus

Restricted Stock
Compensation

Directors (excluding
external directors)

◯

◯※1

◯

Category

◯

ー

◯

◯

ー

◯

External auditors

◯

ー

◯

Determined by the Board of
Directors following deliberationby the Advisory Committee on
Nomination and Remuneration
Determined through consultation
among auditors

Persons Receiving
Payment

Directors (external directors)

12 (5)

590 (89)

Auditors (external auditors)

6 (3)

101 (36)

SocialGovernance

Executives of the Sanki Engineering Group (as of June 23, 2023)⨋ Directors- President- Directors appointed by thepresident and committee
members as necessary•F ixed remuneration:
paid according to rank andscope of responsibilities• Bonus:
portion linked to performance
during the period

Hirokazu Ishida
Representative Director and President

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

Joined the Company in 1983. He engaged in the
Facilities Construction Business for many years.
In 2018, he served in the key post of generalmanager of the Management Planning Office.
He was appointed representative director andpresident in 2020 and has devoted his efforts tostrengthen the management foundation andpromote the “Century 2025” long-term vision.

Eiji Mitsuishi

Masayuki Kudo

Director

Director

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

Joined the Company in 1985. He gained
abundant experience as an engineer in the
Facilities Construction Business, including
many overseas assignments. He was appointed
general manager of the Facility Systems
Division in 2014 and general manager of the
Sustainability Promotion Division in 2022,
and has been devoting his efforts to promotesustainability.

•R estricted stockcompensation:
granted according to rank as along-term incentive*1 E xcluding non-operational executive
officers.
*2 The number of officers covered
includes one auditor who retired at
the conclusion of the 98th Annual
General Meeting of Shareholders on
June 23, 2022.

P. 84
Whistleblowing System

Corporate Governance• Ensuring the Reliability of Financial Reporting
The Internal Finance Control Committee meets four times a year to conduct our
financial reporting in accordance with the internal control framework stipulated by the
Financial Instruments Exchange Act of Japan. Moreover, we promote the establishment
and appropriate operation of an internal control system to safeguard the reliability of
our financial reporting by having the committee deliberate on the assessment andresponse with respect to the accounting risks within each department and Group
company. A report is produced in adherence with the internal control reporting system
to ensure that internal controls related to financial reporting are being exercised
effectively. In the report for fiscal 2022, accounting auditors expressed their opinion that
our financial reports were presented in an appropriate manner in terms of all material
aspects.

Composition of Officer
Remuneration

Tsutomu Hasegawa
Representative Director and Chairman

Governance• 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 forreporting violations of the Anti-Monopoly Act, and a system for reporting to the fulltime auditor as efforts to stringently enforce compliance.
The Board of Directors makes decisions on matters stipulated in laws, regulations,and the Articles of Incorporation as well as on matters related to the execution ofoperations while also supervising to ensure the proper execution of operations. The
Management Meeting is held to ensure the effective execution of duties in accordancewith the rules for discussion and reporting. Moreover, for the free exchange of opinions,the Liaison Meeting of External Officers, consisting of external officers, is convened to
exchange necessary information and share awareness of such information.
To ensure effective auditing, the auditors attend important meetings, offer theiropinions as necessary, receive reports from accounting auditors and the Internal Audit
Office, instruct that this office investigate and report on its findings if needed, anddiscuss matters as required.
In addition, the full-time auditor serves as the auditor of Group companies
and seeks to ascertain the status of internal controls across the Group by regularly
exchanging opinions with the Internal Audit Office and Group company presidents,
receiving reports from the accounting auditors, and exchanging information.

SANKI REPORT 2023

Environment• Individuals who provide
explanations:

Total Payment (Millions of Yen)

⨋ Internal Controls

78•C ommittee (report):
all external directors

G•M
 eetings held in FY2022: 4▍Remuneration for Directors and Auditors*2 in FY2022
Category

Composition of the Advisory
Committee on Nomination andRemuneration

S

Foundation of Sustainability Management

External directors
Auditors (excluding
external auditors)

ProcedureE

Chief Financial Officer

Kazuaki Iijima

Yoshio Kawabe

Director

Director

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

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

SANKI REPORT 2023

79︱Foundation of Sustainability Management ︱Governance︱Corporate Governance

E

S

G

Environment

SocialGovernanceIndependent External Director⨋ Directors

Independent External Director

Yukiteru Yamamoto
External Director
Served in positions including representative
director and president of Mitsui Life Insurance
Company Limited and executive member of the
Policy Board of the Japan Business Federation. He
was appointed external director of the Company
in June 2014 and has also chaired the Board of
Directors since 2020.

Shozo Fujita

Chair of the Advisory Committee
on Nomination and Remuneration

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

External Auditor

Yutaka Atomi

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

External AuditorLong involved in education and researchat a university, he served as dean of thefaculty of medicine at Kyorin University andlater president, and is currently its honorarypresident. He was appointed external auditorof the Company in 2019.

External Director

Toshiaki EgashiraAkihiko Matsuda

External Auditor

External Director

Has served in positions including president andchief executive officer of Mitsui Sumitomo Insurance
Company, Limited, and is currently its special advisor.
He was appointed external auditor of the Company
in 2019.

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

Corporate GovernanceHeld managerial positions in major departmentsof the Bank of Japan. He also served as an
executive officer at Chugai Pharmaceutical Co.,
Ltd., heading the IT Supervisory Division andpromoting social contribution activities. He wasappointed external director of the Company
in 2021.

Governance

Keiji Kono

▍Members of Each Meeting (FY2023) and Attendance (FY2022)
Board of Directors
Category

Tamami Umeda

NameChairperson

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

Directors

Chair of the Board of Company Auditors

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

80

SANKI REPORT 2023

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

Auditors

Advisory Committee on
Nomination and Remuneration
Chairperson

Attendance/
No. of meetings

Board of Auditors
Chairperson

Attendance/
No. of meetings

Tsutomu Hasegawa

13/13

−

−

Hirokazu Ishida

13/13

−

−

Eiji Mitsuishi

13/13

−

−

Masayuki Kudo

13/13

−

−

Kazuaki Iijima

13/13

−

−

Yoshio Kawabe

12/13

−

−

13/13

4/4

−

4/4

−

Yukiteru Yamamoto⨋ Auditor

Attendance/
No. of meetings●

Foundation of Sustainability Management

Chair of the Board of Directors●

Kazuhiko Kashikura

13/13

Keiji Kono

13/13

4/4

−

Akihiko Matsuda

13/13

4/4

−

Tamami Umeda

11/11

2/2

−

Kazuo Saito

13/13

−

Kunihiko Tachi

11/11

−

6/6

Shozo Fujita

13/13

−

8/8

Yutaka Atomi

12/13

−

8/8

Toshiaki Egashira

13/13

−

8/8

●

8/8

SANKI REPORT 2023

81

Ishida • We have appointed Mr. Yamamoto, who is
an independent director, as Chairman of the Board of
Directors to strengthen its supervision functions. He also

Ishida • Sanki Engineering has grown on the strengthof its technological capabilities, and I place the highest
priority on utilizing the human capital that supports

President

External Director

Dialogue between President Ishida
and External Director Umeda

A Governance Structure that
Supports Sustainability Management
President Ishida and External Director Umeda exchanged views on governance and the future direction of
the Sanki Engineering Group in pursuit of sustainable growth through sustainability management.

Governance Structure that Invigorates Diversity and
Dialogue

How do you view Sanki Engineering as anexternal director?
Umeda • In the year since becoming an external
director, I have realized that in many of the buildings I’ve
been in, there are facilities installed by Sanki Engineering,so I can now see my connection with the Company
had been closer than I’d thought. As I learned more
about Sanki Engineering’s business, I increasingly feltthat it deserves greater public recognition. For example,
its contribution to achieving a decarbonized society
through its SANKI YOU Eco Contribution Point system* isa unique and wonderful initiative.
*See page 51.

Ishida • Our business is linked to carbon neutrality
in a number of ways, and our operations lead tosustainability from different perspectives. However, asa B to B business, we may not have been sufficiently
communicating this to the general public.
Umeda • I was also given the opportunity to tour

82

SANKI REPORT 2023

Opening New Pathways into the Future with
the Power of People and Technology

Finally, what are your expectations for the
Sanki Engineering Group in the years ahead?
Umeda • Continuing to achieve sustainable growth
in an era of such rapid and dramatic social change will
require being a company that accurately grasps theneeds of society while responding with innovativeideas and technologies. Sanki Engineering’s mostappealing aspects are its honest corporate culture
and down-to-earth management, and I expect it will
improve these strengths by fully realizing the potentialof the technology it has cultivated to develop business,enhance value creation, and open up new pathways into
the future.
Ishida • As global issues continue to evolve, I believe
the time has come to reevaluate our response as a total
engineering company. While there is no doubt about
the value of the unique technologies we have cultivatedover nearly a hundred years and the relationships oftrust we have forged with our stakeholders, the times
require us to address social issues with a willingness
to participate in open innovation and other forms ofexternal collaboration. To that end, I want to pay evencloser attention to the opinions and suggestions of ourboard members, who come from diverse backgrounds.

SANKI REPORT 2023

Dialogue between President Ishida and External Director Umeda

What would you emphasize as being effective
for utilizing Sanki Engineering’s management
capital?

Tamami Umeda

GovernanceHow do you evaluate the effectiveness of
the Board of Directors and the governancestructure?

Hirokazu Ishidathis growth. In terms of investing in that, our policy is tospare no effort to ensure appropriate profits and improve
the working environment so that our employees canwork with a strong sense of purpose and motivation.
Today, with the increasing diversity of life planning,
we must continuously think about how we can makeemployees happy.
Umeda • I have the strong impression that SankiEngineering employees are working diligently as theunsung heroes of society, but they may not be keenly
aware that their daily work is directly connected toresolving social issues and contributing to sustainability.
I think you could further raise their awareness andencourage each of them to demonstrate theircapabilities by entering sustainability-related awards
and other contests for the sake of gaining external
recognition, and by communicating both internallyand externally the value of government verification
projects for resolving social issues in which the Company
participates.

Foundation of Sustainability Management

drainage disposal and other facilities, and I gained astrong sense of the Company’s efforts to add greater
value to critical social infrastructure, such as actively
introducing energy-saving facilities and effectively using
sludge. When I toured the Sanki Techno Center, efforts
to creatively change behavior were clearly evident
throughout the training facility in addition to its focus
on conveying safety-related skills and knowledge. The
enthusiasm people seemed to have for their work gave
me a powerful impression of a diligent company.
Ishida • We provide our external directors with
opportunities to visit our facilities and construction sites
to meet with employees face to face. I think you can gain
insight into our corporate culture by directly interactingwith employees in the field.

attends the Management Meeting and various policy
meetings and is responsible for setting appropriate
board meeting agendas and proceedings from a highlevel perspective with a sound executive understandingof the situation. Our external directors speak out fromtheir respective backgrounds, and I feel the Board of
Directors’ effectiveness has been significantly enhancedby the members engaging in dialogue stimulatedby their own opinions, which at times are promptly
reflected in management decisions. We have seen
increasingly vigorous discussion on potentially high risk
issues, such as sustainability.
Umeda • I have served in various administrative posts inhealthcare, environmental, and other fields and have also
been involved in international organizations and national
diplomacy related to international healthcare. I therefore
try to offer advice based not only on my field of expertise
but also on knowledge accumulated through first-handexperience in such areas as effective collaboration
between industry, government, and academia. Although
I’m an outsider to the construction industry, I feel quite
comfortable speaking up at the board meetings, andwhen I ask simple questions, the executives provide
detailed explanations. What’s more, I’m often inspiredby the comments made by other external directors, whobring a wealth of management experience, and I feel thatour discussions are very meaningful.
Ishida • An evaluation of the effectiveness of the Boardof Directors for fiscal 2022 was conducted through aninterview by a third party with expertise in corporate
governance. Over the past two years, the evaluation
had been conducted using a questionnaire, but since
the responses tended to converge on similar ideas, we
decided to use interviews this time to surface moredetailed information. Looking ahead, we will continue toexplore different methods to enhance the evaluations.
Umeda • The interviewer’s awareness of the issues wasreflected in questions following up on matters that hadcome up in past questionnaires, and it was clear that
PDCA improvement cycles were being implemented. As
for myself, the interviews provided a good opportunity
to reaffirm my responsibilities and role as an external
director.

83︱Foundation of Sustainability Management ︱Governance

E

S

G

Environment

SocialGovernanceCompliance▍Whistleblowing System

Basic Philosophy

Full-time auditor

Sanki Engineering Group Compliance Declaration, SankiEngineering Group Conduct Standards

https://www.sanki.co.jp/en/csr/policy/compliance.html#etc02

Sanki Engineering Group Code of Conduct and Action
Guidelines

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

ReportOfficers responsible for corporate ethics
ReportReportIn-house hotline (Sustainability Promotion Division)

External hotline(consulting
attorney)Compliance Promotion System
We have established a Corporate Ethics Committee, chaired by the president, whonominates officers responsible for corporate ethics to oversee the committee’s
activities. The committee reviews, monitors, and provides guidance with respect
to compliance guidelines and action plans for the entire Group, and the Board of
Directors regularly verifies the effectiveness of its activities.

Corporate Ethics Hotline
Fair Trade Hotline

If the person wants to report

Women’s
HotlineReport and Consultation

P. 74
Corporate Governance System

Compliance Promotion Activities
In order for all Group executives and employees to refresh their awareness of the
responsibilities they must fulfill in their respective positions and roles, complianceconfirmation sheets covering items such as observance of the Code of Conduct
and Action Guidelines, and eliminating antisocial forces, are submitted at the
beginning of each fiscal year.

⨋ Whistleblowing System▍Number of People Submitting Compliance Confirmation Sheets (Fiscal 2023)

Number of Reports
Corporate Ethics Hotline

10

Fair Trade Hotline

0

Women’s Hotline

0Consulting Office for Harassment and Other Concerns

1

Consultations

10

SANKI REPORT 2023

Sanki Engineering(Target Employees)
Compliance confirmation sheets concerning
performance of duties*1
Compliance confirmation sheets*2

E-mailhotline@eng.sanki.co.jp

Reporting and Consulting
Channels

https://www.sanki.co.jp/en/csr/
governance/hotline/

38

Group Companies(Target Employees)（38）

っs37 （37）2,027（2,063）

498（509）*1 D irectors and executive officers
submit compliance confirmation
sheets related to the execution ofoperations.
*2 I ndividuals who did not submit
compliance confirmation sheets
were unable to do so due to reasons
such as maternity leave and medical
treatment.

Compliance

The Internal Audit Office seeks to strengthen compliance by providing guidanceon audits. In fiscal 2022, internal audits were carried out at 20 worksites, including
16 in Japan and 4 subsidiaries in Japan and overseas. In addition, we conductedhearings with onsite staff by visiting Company sites and via web conferencing tofoster compliance awareness.

Governance⨋ Compliance Confirmation Sheets from All Executives and Employees▍Number of Reports and Consultations in Fiscal 2022

Poster promoting the whistleblowing
systemConsulting Office for Harassment andOther Concerns (professional counselor
outside the Company)⨋ Compliance Audit

We set up the Corporate Ethics Hotline for reporting on compliance-related issues,
the Fair Trade Hotline for reporting on violations of the Anti-Monopoly Act, theWomen’s Hotline for accepting consultations from women, and the Consulting Officefor Harassment and Other Concerns. All hotlines are open to all employees, andinformation is posted on the corporate website.
With regard to each hotline, we act swiftly to resolve the issues that are reported,with due consideration for the protection of anyone seeking consultation or providing
information in accordance with the Corporate Ethics Regulations. All reported
information is presented to corporate ethics officers , and important information isreported to the Board of Directors. At the Corporate Ethics Hotline, the reporter’s nameis handled in secrecy by corporate ethics officers 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.
In fiscal 2022, there were 11 reported incidents (10 internally and 1 externally), andall incidents were handled appropriately.

84

ReportBoard of Directors

Foundation of Sustainability Management

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

⨋ Response to Antisocial Forces

We clearly state that severing relationships with antisocial forces is a condition
for doing business with our partners and ask them to submit a Letter of Intent
Regarding the Elimination of Antisocial Forces. As of March 31, 2023, we havereceived the letter from a cumulative total of 3,906 companies.
⨋ Training and Handbook for Ensuring Thorough Compliance

Sanki Engineering conducts training for all executives and employees on a regularbasis in order to ensure thorough dissemination of and compliance with the Code of
Conduct and Action Guidelines. Separate special training is provided for mid-careerhires when they join the Company and for new sales representatives when they start
their position.
We also distribute the Sanki Engineering Group Sustainability Handbook, a pocketsized reference on policies related to compliance and sustainability, including specificexplanations for practical situations and information on hotlines for reporting andconsultation.

Sustainability Handbook

SANKI REPORT 2023

85

︱Foundation of Sustainability Management ︱Governance︱Compliance

Risk Management▍Compliance-Related Training (FY2022)
Theme

TargetFrequency and Participation(Attendance Rate)
10 sessions
2,632 employees (99%)*

All Group executive
officers and employees
Mid-career hires

5 employees (100%)

Compliance with the Anti-Monopoly Act

Newly assigned sales staff

38 employees (100%)

Human Rights Policy, Environmental Policy

All Group executive
officers and employees

2,628 employees (99%)*⨋ Survey on Status of Compliance in the Workplace

We conduct a survey every fiscal year on the status of compliance in theworkplace, targeting all executive officers and employees. It incorporates
questions on compliance and human rights risks, including about issues related toharassment in the workplace, by customers and business partners. Survey results
are disclosed to all Group executives and employees.

Reinforcing Compliance with the Anti-Monopoly Act⨋ Ongoing Measures for Recurrence Prevention

The following are key measures on reinforcing compliance that we undertook to date.
In October 2022, we revised the Anti-Monopoly Act Compliance Manual. Applying theresults of the survey on compliance in the workplace, we will continue our Group-wide
effort to prevent violations of the Anti-Monopoly Act in fiscal 2023.

Q Do you think that complianceconscious behavior has
permeated our Group?
• Yes.
• Somewhat.
• I’m leaning toward “no” here.
• No.

37%
58%
4%
1%

Q Please choose all of the following
statements that apply to yourcurrent working environment.
(Multiple answers are allowed.)• I think that personal
relationships in the69%
workplace are relatively
good.
• It seems easy to take various
kinds of leave.

60%• Y our supervisor is willing tolisten to your opinions andsuggestions.

47%

Q What do you think is importantfor creating a workplace thatis less prone to complianceviolations? (Multiple answers
are allowed.)• I mproving personal morals
75%
and awareness• I mproving communicationin the workplace51%• E liminating work overload
and understaffing

48%

Risk Management Promotion System
The Risk Management Committee meets quarterly, and risks are managed through the
Risk Management Division and the subcommittees responsible for various risks.
The Risk Management Committee is attended by the risk management executive,
members of the Management Meeting, chairpersons of each risk management
subcommittee, and the general manager of the Internal Audit Office, with the full-time
auditor also participating as an observer. The president currently serves as the risk
management executive.
The Risk Management Division consists of representatives from each department
and Group company and is responsible for discerning changes in the environment ona daily basis to identify emerging risk factors and managing signs of risk manifestation.
The Risk Management Subcommittees monitor risks from a broader perspective andprovide cross-sectional supervision for risks raised by departments, and they also
consider and implement countermeasures. At each meeting, the Risk Management
Committee monitors and evaluates risks based on review sheets covering various risks
and reports from each risk management division and Risk Management Subcommittee,
and deliberates on how to control key risks identified in the process.

• R esolved to establish a comprehensive, Group-wide Anti-Monopoly Act Compliance Program at a meeting of the Board of Directors and ran/implemented the program• Assigned a compliance manager in each division and began supervising the process for deciding the bid amount for public works and operating a system of advanceapplication and reporting when attending a meeting with any companies in the same industry• I ntroduced regular rotations for sales staff assignments• Established a Compliance Risk Subcommittee within the Risk Management Committee• R econsidered membership in outside groups• B egan an in-house leniency system (voluntary reporting system)• Established the Fair Trade Hotline for reporting on violations of the Anti-Monopoly Act and sought awareness among employees

Training and Education• S ubmitted compliance commitment letters• R aised 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 special training on the Anti-Monopoly Act for newly assigned sales staff and mid-career hires• Conducted e-learning on the Anti-Monopoly Act for all employees

86

SANKI REPORT 2023

• Members: M anagement meeting
constituent members
and persons nominatedby the chairperson• Roles:
1. Monitor important risks andformulate a control plan
2. Monitor risks reported bysubcommittees and divisions• Convenes: O nce a quarterin principle andadditionally as required

Board of Directors
ReportManagement Meeting
ReportReportPolicies and Manuals

Structural Reinforcements• Chairperson: R isk management
executive (president)▍Framework of the Risk Management System (as of June 23, 2023)

Internal Audit Office• Formulated the Sanki Engineering Group Compliance Declaration and Sanki Engineering Group Conduct Standards• Issued and revised the Compliance Handbook• Issued the Sustainability Handbook• Issued and revised the Anti-Monopoly Act Compliance Manual• C learly stipulated breaches of laws such as the Anti-Monopoly Act as grounds for disciplinary action

Risk Management Committee⨋ Management Based on the Risk Management Rules

Risk Management

We are working to prevent corrupt practices under the Sanki Engineering Group
Action Guidelines, which prohibits bribing public officials and providing benefits
such as excessive business entertainment. In addition to establishing a program
specifically related to bribery as part of our corporate ethics training, we provide
e-learning for all employees. Points to consider when making practical businessdecisions and points to keep in mind outside Japan are also explained in the SankiEngineering Group Sustainability Handbook.

Survey period: May and June 2023
Participants: all Group executive
officers and employees

The Sanki Engineering Group’s Enterprise Risk Management system consists of two pillars. Daily risk management isundertaken by the Risk Management Committee based on the Risk Management Rules, while the Business Continuity
Management System safeguards the effectiveness of business continuity planning in the event of contingencies,
including crisis management.

GovernanceInitiatives for Preventing Bribery

FY2023 Survey on Compliancein the Workplace

Basic Philosophy
Foundation of Sustainability Management

Compliance topics including the Codeof Conduct and Action Guidelines,
Anti-Monopoly Act, human rights, andpreventing bribery*Individuals who did not participate intraining were unable to do so due toreasons such as maternity leave andmedical treatment.

Risk Management Committee

Collaboration

ReportRisk auditing
Instructions

Instructions

Committees and Management System

Corporate Ethics Committee

Risk Management Division

Risk Management Subcommittees

All departments and Group
companies:
All offices, headquarters,
centers, business divisions,business departments,
branches and branch offices,and Group companies

Customer risk

Overseas risk

Supplier risk

Compliance risk

Labor risk

Climate change risk

Management review of EMS and QMS

Internal Finance Control Committee
Sustainability Committee

Legal risk

Quality risk

Central Safety and Health Committee

Finance risk

Safety risk

BCMS Promotion Committee

Information
security risk

Management(public relations) risk

SANKI REPORT 2023

87︱Foundation of Sustainability Management ︱Governance︱Risk Management⨋ Roles of the Board of Directors and Internal Audit Office

Coordination with BCMS

Expanded Risk Management
Committee

OutlineFlexibly manage the PDCA cycle of the Business Continuity
Management System (BCMS), which will be operational in fiscal
2022.
Hold an expanded meeting of the Risk Management Committee
by effectively utilizing the Executive Officer Committee toestablish risk management and BCMS across the Group.

Business Continuity Management System (BCMS)
To prepare against risks that could hinder business continuity, we have formulated
and put into place a business continuity plan (BCP) to ensure the safety of all related
persons, including employees, through the integrated efforts of all executives andemployees. In fiscal 2021, we began preparing to establish a BCMS as a mechanism
for the effective maintenance and management of the BCP, and began operating thesystem in fiscal 2022.
Under the BCMS, we laid out an annual plan to periodically review the BCP
through PDCA activities (business impact analysis, education, training, internal
audits, management review, review, and improvement) and by coordinating withrisk management undertaken by the Risk Management Committee. During thereview process, we conduct a business impact analysis, from the perspectives of risk
assessment and impact evaluation, to investigate and analyze the degree to which eachtarget operation will be impacted in the event a risk materializes and to take concretemeasures to strengthen corporate resilience.
Furthermore, to realize a system for rapid business recovery and maintenance,
we formulated risk-specific response guidelines based on the BCP Common Version,
which describes our basic response policy. The guidelines address the seven risksof natural disasters, infectious diseases, industrial accidents, cyberattacks, terrorism,
misconduct, and communication failure. Since fiscal 2023, the scope of the BCMS has

88

SANKI REPORT 2023

Governance•B usiness Operation Risks- Common to all construction
businesses• Securing human resources• Increase in materials and laborcosts and delays in delivery ofmaterials and equipment• Overseas business risks• A ccidents and disasters during
construction• Unprofitable construction- Facilities Construction Business• O verabundance of planned
projects and response to global
challenges• Increase in property size
- M achinery Systems Business• Decrease in capital investment• Decline in competitiveness- E nvironmental Systems
Business• Changes in market conditions• Long-term business risks- R eal Estate Business• Rent fluctuations• Decline in occupancy rate

• Financial and Other Risks- Customer credit risk

- Stock market fluctuations- Interest rate fluctuations- R isks related to litigation, etc.
- Seasonal fluctuations inbusiness performance- L egal violations- W ar, terrorism, and natural
disasters- C limate change- Infectious disease epidemic- Data security breach- System failure

Annual Securities Report forthe 99th Business Term (from
April 1, 2022 to March 31, 2023)(in Japanese)

https://www.sanki.co.jp/ir/library/doc/
securities_R4-4q.pdf

Natural disasters

Communication failure(earthquakes, typhoons, volcanic
eruptions, tsunami, etc.)

Infectious diseases

Comprehensive Disaster Response Headquarters set up
during a drill

Misconduct(new Influenza strains,
infectious diseases,etc.)(bid-rigging, data
falsification, etc.)
Risks that Hinder
Business Continuity

Industrial accidents

Terrorism and conflicts, etc.

(fatal accidents, etc.)

Cyberattacks

Strengthening Risk Management in Overseas Operations
An Overseas Risk Subcommittee was set up within the Risk Management Committee
to analyze risks and consider countermeasures. To ensure the safety of employees
working outside Japan, 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. Compliance training sessions for local staff at overseas sites
have been conducted since fiscal 2021 to firmly establish governance across the Group.
In addition, our auditors concurrently serve as auditors of Group companies, and we areworking to improve our Group management system, including at overseas sites.

Initiatives on Information Security
We have established the Information Security Risk Subcommittee within the Risk
Management Committee to control information security measures across theGroup and manage risks. We are taking action to respond quickly to cyber attacks
by deploying information security software and installing software that constantly
monitors the intrusion of malware and other malicious software. In July 2023, werevised our information security measure guidelines regarding precautions for the useof generative AI services. We are also promoting the use of cloud services to addressrisks to construction site data storage involving many companies. In addition, we
provide ongoing training through e-learning on information security for all Company
employees and employees of subcontractors.

Risk Management Manual for
Overseas Operations• Response rules and procedures tobe followed by the head office andoverseas bases in the event of acrisis overseas• Risks to physical well-being and life,
violation of laws and regulations,
response to mass media, litigation,
etc.
Manual to Ensure Safety
in Foreign Countries• A practical guide on risk avoidanceand emergency response for
employees working overseas• Actions required in the eventof a terrorist attack or disaster,
prevention of damage from crimeand other risks, compliance with
anti-corruption and other laws,
personnel/labor management oflocally employed staff, religion, andother related matters

Risk Management

PolicySocialGovernance▍FY2022 Operational Policy for Risk Management

Environment

Foundation of Sustainability Management

Major issues discussed in fiscal 2022 are summarized below.
•R ecognize large-scale communication failures as a new risk and guide the developmentof countermeasures in coordination with the Business Continuity Management System(BCMS)• Reinforce the monitoring of rising materials and equipment costs and delays in delivery• Reinforce the monitoring of work conditions in response to Japan’s revised Labor
Standards Act• Guide the development of risk control measures related to specific construction projects
and monitor progress• Coordinate with special discussions on risk governance conducted by the Board of
Directors• Continue monitoring risks associated with COVID-19

G▍Seven Major Risks that Hinder Business Continuity
Major Business Risks⨋ M ajor Issues Discussed by the Risk Management CommitteeS

been expanded to include domestic Group companies. In addition, to prepare forcontingencies, we continue to provide BCMS training for directors and employees,
conduct periodic drills, and add to our emergency supplies. In particular, we began
conducting new drills for industrial accidents, cyberattacks, and misconduct, in addition
to drills for natural disasters, to strengthen our response capabilities.

The Risk Management Committee reports on the results of its deliberations to theBoard of Directors, which ensures effective risk governance by verifying the adequacyof the risk management system and the effectiveness of controls over material risks.
The status of risk management at each department is ascertained and verified by
the Internal Audit Office during regular internal audits.

Risk Management Activities

E

Information Security Rules
and Standards• I nformation Security
Management Rules• I nformation System Usage
Standards• I nformation Security Risk
Management Standards• I nformation Security Risk
Countermeasure Standards

SANKI REPORT 2023

89︱Foundation of Sustainability Management ︱Governance︱Dialogue with Shareholders
and Investors

Share Information
Share Information (as of March 31, 2023)

Basic Philosophy

Sanki Engineering Corporate Governance Guidelines

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

Appropriate Information Disclosure and Constructive Dialogue

Major Dialogue with Shareholders and Investors
I n addition to questions and comments about business per formance and the businessenvironment, the following themes were discussed in the dialogue.

External Recognition

Annual general meetingof shareholders

Late June each year

Trading unit

100 shares

Number of authorized shares

192,945,000

Number of issued shares

58,161,156

Number of shareholders

13,675

Transfer agent and special
account management
institution

Sumitomo Mitsui Trust Bank,
Limited1- 4-1, Marunouchi, Chiyoda-ku,
Tokyo

Stock exchange listing

Tokyo Stock Exchange

Securities code

1961

■ Ownership Statistics
Treasury stock: 1
3,722 thousand shares(6.40%)

Individuals and other: 13,238
14,882 thousand shares(25.59%)Financial
institutions: 25
21,734thousand shares(37.37%)

Foreign corporations
and other: 210
12,153 thousand shares(20.90%)

Securities
companies: 31
1,655 thousand
shares (2.84%)

Other corporations: 170
4,012 thousand shares(6.90%)IR Meetings in FY2022• Personnel responsible- Director and chief financial
officer- General manager of theManagement Planning Office- General manager of Corporate
Communications Department- Staff in charge of IR•T arget shareholders andinvestors- F inancial institutions
13 meetings (7 companies)- Investment managementcompanies
21 meetings (14 companies)- Securities companies
11 meetings (5 companies)

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

https://www.sanki.co.jp/en/ir/policy/
doc/Medium-Term_Management_Plan_
Century_2025Phase3.pdf■ Major Shareholders
Number of Shares Held(Thousand Shares)

Shareholding Ratio(%)

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

6,193

11.38

Meiji Yasuda Life Insurance Company

5,440

9.99

Taiju Life Insurance Company Limited

3,123

5.74

Sanki Kyoueikai

3,096

5.69

Nippon Life Insurance Company

2,324

4.27

Custody Bank of Japan, Ltd. (Trust Account)

2,193

4.03

Sanki Engineering Employee Shareholding Association

1,493

2.74

State Street Bank and Trust Company 505001

950

1.75

MSIP Client Securities

866

1.59

JPMorgan Chase & Co. 380684

838

1.54

Name of Shareholder⨋ Received Top Rating in the ESG/SDGs Assessment Loan Scheme

Sanki Engineering received the highest rating of AAA for an ESG/SDGs Assessment
Syndicated Loan scheme in which the Sumitomo Mitsui Banking Corporation
extends loans based on an independent corporate evaluation conducted by theJapan Research Institute. We were recognized for achieving high marks in the areasof response to climate change, integrity in customer relationships, and sustainability
management.

Sumitomo Mitsui Banking Corporation ESG/
SDGs Assessment Loan

In the 4th Nikkei SDGs Management Survey, Sanki Engineering was rated 3.5 on ascale of 5 stars. The survey comprehensively evaluates a company’s contribution torealizing the SDGs in the four categories of SDG strategy and economic value, social
value, environmental value, and governance.

Share Information

Notes: Although the Company holds 3,722 thousand shares of treasury stock, it is excluded from the list of major shareholders. Calculation of shareholding ratio
excludes treasury stock.

⨋ Nikkei SDGs Management Survey Rating of 3.5 Stars

Financial Report and Corporate Information• Status of the Medium-Term Management Plan “Century 2025” Phase 3• Impact of the sharp rise in material, equipment, and labor costs on business performance• Response to and impact of overtime caps applied in 2024

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

April 1 to March 31 of thefollowing year

Dialogue with Shareholders and Investors⨋ Status of Dialogue with Shareholders and Investors

In addition to livestreaming the general meeting of shareholders, we are striving toprovide greater convenience for shareholders and enhance information disclosureby accepting questions via the corporate website ahead of the general meetingof shareholders and providing videos of the president’s business reports on the
Company’s website. We engage our investors by holding results briefings foranalysts and institutional investors, as well as individual IR meetings throughout theyear (45 times in fiscal 2022). We also periodically conduct shareholder surveys, andthe needs and opinions identified through such dialogue with shareholders andinvestors are regularly presented to the Board of Directors and the Management
Meeting.

Disclosure Policy

Fiscal year

Foundation of Sustainability Management

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

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

Financial Report and Corporate Information ︱Nikkei SDGs Management Survey

90

SANKI REPORT 2023

SANKI REPORT 2023

91︱

Financial Report and Corporate Information ︱Financial Report
11-Year Consolidated Financial Summary(Millions of yen)

Year ended March 31, Year ended March 31, Year ended March 31,
2013
2014
2015

Year ended March 31,
2016

Year ended March Year ended March 31, Year ended March 31, Year ended March 31, Year ended March 31, Year ended March 31, Year ended March 31,
31, 2017
2018
2019
2020
2021
2022
2023

Orders received

165,800

168,295

173,398

183,270

185,880

191,113217,096

194,018

195,580

202,250

228,554

Balance carried forward

111,414108,219

102,019

106,388

123,756

144,712

149,495

136,163

141,676

150,737

188,426

Net sales

154,658

171,496

179,598

178,901

168,512170,157

212,314207,684

190,067

193,189

190,865

Selling, general and administrative expenses

15,19915,60415,015

16,41916,526

18,466

21,046

21,436

21,255

21,11021,603Operating profit

2,391

2,818

2,951

6,509

6,012

6,593

10,637

10,674

7,498

9,112

5,409

Ordinary profit

2,680

3,146

3,809

8,135

6,880

7,434

11,204

11,224

8,196

9,817

6,247

Profit (loss) attributable to owners of parent*(4,992)

1,763

2,461

5,327

4,698

3,906

9,046

7,576

5,901

6,489

4,750

Cash flows from operating activities

9,729(9,403)

(139)

5,220

10,845

6,306

6,786

11,940(483)

18,529(10,584)

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

3,440

5,520

(1,644)(2,510)(3,775)(303)(1,423)(3,384)(969)

Cash flows from financing activities(1,028)(4,152)(2,901)(1,826)(2,458)

1,814(5,215)(8,955)(6,974)(7,518)(8,327)

Cash and cash equivalents at end of period

40,36723,51023,66732,501

39,18744,866

42,61245,94637,08744,77924,949Total assets

166,477

170,181

176,382

169,423

166,612

177,014

195,321

180,805

171,313

183,609172,305

Net assets

76,932

74,91784,86984,55785,961

86,191

89,77287,364

91,69994,27890,913

Number of employees

2,246

2,283

2,282

2,309

2,339

2,384

2,394

2,501

2,548

2,607

2,627

Financial Report and Corporate Information

Fiscal year

As of end of fiscal year under review

Earnings per share (yen)(71.04)

26.46

38.30

83.84

73.91

63.02

150.02128.51103.12115.1385.80

Book-value per share (yen)1,106.32

1,142.74

1,334.65

1,328.60

1,350.08

1,419.77

1,502.53

1,510.59

1,611.76

1,685.20

1,666.36

15.00

15.00

20.00

30.00

30.00

35.00

60.00

95.00

80.00

85.00

75.00

52.6

Cash dividends (yen)Financial Report

Per share information

Other information
Equity ratio (%)

46.2

44.0

48.1

49.8

51.5

48.6

45.8

48.2

53.4

51.2

Return on assets (%)

1.6

1.9

2.2

4.7

4.1

4.3

6.0

6.0

4.7

5.5

3.5

Return on equity (%)

(6.4)

2.3

3.0

6.3

5.5

4.5

10.3

8.6

6.6

7.0

5.1

*T he revised Accounting Standard for Business Combination and other standards have been applied since fiscal 2015. Accordingly, “Profit attributable to ownersof parent,” as listed in fiscal 2015 and after, is equivalent to “Net income” listed for the consolidated fiscal years between fiscal 2012 and fiscal 2014.

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

Orders received and Net sales

300,000
250,000(Millions of yen)（単位：百万円）
Profit(Left axis) ■ Annual dividend per share(Right axis) ■ Consolidated payout ratio

20,00015,000200,000
150,000■ Change in Dividend Per Share and Consolidated Payout Ratio*

(Yen)

(%)

100

100

80

80

60

60

40

40

20

20

10,000100,000
5,000
50,000000-50,000-5,000

92

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

（FY） 0*The payout ratio was not calculated for fiscal 2012 since the Company reported a net loss.

-100,000-150,000

2012

2012

SANKI REPORT 2023

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

(FY)

-10,000

SANKI REPORT 2023

93︱Financial Report and Corporate Information ︱Consolidated Balance Sheets(Millions of yen)
As of March 31, 2022

(Millions of yen)

As of March 31, 2023

Assets

As of March 31, 2022

As of March 31, 2023

Liabilities

Current assets:

Current liabilities:¥24,949

Electronically recorded obligations-operating¥2,588¥1,667

Notes receivable-trade

595

407

Accounts payable for construction contracts

37,93235,074

Electronically recorded monetary claims-operating

7,124

4,603

Short-term borrowings

8,885

6,674

Accounts receivable from completed construction contracts and other

39,412

48,286

94

97

Contract assets

19,62923,843

Income taxes payable

2,659

839

Securities

5,999

4,000

Contract liabilities

2,921

2,801

14,75415,027

Costs on construction contracts in progress

756

711

Provision for bonuses

4,143

4,101

6,541

5,908

Provision for directors’ bonuses

234

224

(17)

–

1,289

1,405

125,742

115,512

9

32

Other

6,617

4,505

Total current liabilities

79,21069,649Long-term borrowings

320

1,400

325

300

2,581

3,861

Provision for loss on business of subsidiaries and associates

440

440

Deferred tax liabilities

670

64

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

Non-current assets:

Lease obligations

Provision for warranties for completed construction
Provision for loss on construction contracts

Financial Report and Corporate Information¥42,779

Cash and deposits

Property, plant, and equipment:
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, vehicles, tools, furniture and fixtures
Accumulated depreciation
Machinery, vehicles, tools, furniture and fixtures, net
Land
Lease assets
Accumulated depreciation
Leased assets, net
Construction in progress
Total property, plant, and equipment

43,83043,955(34,123)(34,672)

9,707

9,283

Lease obligations

2,028

2,111

Retirement benefit liability(1,630)(1,687)

398

424

3,085

3,035

542

538

(230)

(266)

311

271

1

22

13,504

13,037

Intangible assets:
Other

1,255

2,302

Total intangible assets

1,255

2,302

Investments and other assets:

Other

10,121

81,392

Share capital

8,105

8,105

Capital surplus

4,181

4,189

Retained earnings

Net assets:
Shareholders’ equity:

75,09773,051

Treasury shares(5,243)(5,335)

Total shareholders’ equity

82,14080,011

12,116

10,583

Deferred gains or losses on hedges(5)–

Foreign currency translation adjustment

(19)

101

Remeasurements of defined benefit plans

(265)

17

Total accumulated other comprehensive income

11,827

10,702310

199

94,27890,913¥183,609¥172,305

28,01064Retirement benefit asset

6,303

7,190

Leasehold and guarantee deposits

1,466

1,636

Insurance funds

1,252

1,011

Deferred tax assets

821

849

Other

3,160

3,026

Allowance for doubtful accounts

(419)

(337)

43,106

41,453

Share acquisition rights

57,866

56,793

Total net assets¥183,609¥172,305

Total non-current assets
Total assets

SANKI REPORT 2023

5,675

89,331

Total liabilities

73

Total investments and other assets

5,784

11,742

Total non-current liabilities

30,447

Investment securities
Long-term loans receivable94

Non-current liabilities:

Accumulated other comprehensive income:
Valuation difference on available-for-sale securities

Total liabilities and net assets

SANKI REPORT 2023

95

︱Financial Report and Corporate Information ︱Consolidated Statement of Income and Comprehensive Income

Consolidated Statement of Changes in Equity(Millions of yen)
As of March 31, 2023

¥190,646
2,542
193,189¥188,258
2,607
190,865

161,430
1,535
162,965

162,217
1,635
163,853

Fiscal year ended March 31, 2022

Net sales:
Net sales of completed construction contracts
Net sales in real estate business and otherTotal net sales
Cost of sales:
Cost of sales of completed construction contracts
Cost of sales in 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

29,216
1,007
30,223

26,040971
27,012

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

7,915
1,744
217
467
–
879
10,377
21,603
5,409

Selling, general, and administrative expenses:
Employees’ salaries and allowances
Provision for bonuses
Provision for bonuses for directors (and other officers)
Retirement benefit expenses
Provision of allowance for doubtful accounts
Depreciation
Other
Total selling, general, and administrative expenses
Operating profit
Non-operating income:Interest income
Dividend income
Waste disposal income
Other
Total non-operating income

15
560
175
296
1,047

17
628
194
365
1,205

112
6
223
342
9,817

98
65
203
367
6,247

–
50
50

22
1,027
1,049

Non-operating expenses:
Interest expense
Office relocation expenses
Other
Total non-operating expenses
Ordinary profit
Gain on sale of non-current assets
Gain on sale of investment securities
Total extraordinary income
Extraordinary losses:
Impairment losses
Loss on retirement of non-current assets
Loss on valuation of investment securities
Provision for loss on business of subsidiaries and associates
Settlement payments
Total extraordinary losses
Profit before income taxes
Income taxes—current
Income taxes—deferred
Total income taxes
ProfitShare capital
Balance at beginning of period

22
114
77
140
–
354
9,514
3,512
(487)
3,024
¥6,489

–
189
31
–
139
360
6,935
2,282
(96)
2,185
¥4,750

Profit attributable to non-controlling interests

6,489
–

4,750
–

1,263
(7)
97
643
1,995
¥8,485(1,532)5
120
282(1,124)¥3,626¥8,485¥–¥3,626¥–

Other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total other comprehensive income
Comprehensive income
Comprehensive income attributable owners of parent
Comprehensive income attributable non-controlling interests

96

SANKI REPORT 2023

Treasury shares¥73,158

Dividends of surplus(4,537)
6,489

Purchase of treasury shares
Disposal of treasury shares(13)

Transfer of loss on disposal of treasury shares

13

Total shareholders’ equity¥ (3,859)¥81,585(4,537)
6,489(1,438)(1,438)

55

41

(13)

–

Net changes in items other than shareholders’ equity
Total changes during period
Balance at end of period

−

−

1,938

(1,383)555¥8,105¥4,181¥75,097¥ (5,243)¥82,140

Accumulated other comprehensive income

Balance at beginning of period

Valuation difference
on available-for-salesecurities

Deferred gains orlosses on hedges¥10,8532

Foreign currencytranslation
adjustment¥ (116)

Remeasurementsof defined benefit
plans

Total accumulated
othercomprehensive
incomeShare
acquisitionrights¥ (908)¥9,831¥282

Total net
assets¥91,699

Changes during period
Dividends of surplus(4,537)

Profit attributable to owners of parent

6,489

Purchase of treasury shares(1,438)

Disposal of treasury shares

41

Transfer of loss on disposal of treasury shares
Net changes in items other than shareholders’ equity
Total changes during period
Balance at end of period

–
1,263

(7)

97

643

1,995

27

2,023

1,263

(7)

97

643

1,995

27

2,578

¥12,116(5)¥ (19)¥ (265)¥11,827¥310¥94,278

For the year ended March 31, 2023
Shareholders’ equity
Share capital

Capital surplus¥8,105Retained earnings¥4,181(Millions of yen)
Total shareholders’ equity

Treasury shares¥75,097¥ (5,243)¥82,140

Changes during period
Dividends of surplus(4,743)

Profit attributable to owners of parent

4,750

Purchase of treasury shares
Disposal of treasury shares(28)

Transfer of loss on disposal of treasury shares

36(4,743)4,750(2,347)(2,347)

239

211

2,016

–

(36)
(2,016)

Cancellation of treasury shares–

Net changes in items other than shareholders’ equity–

8(2,045)(91)(2,128)¥8,105¥4,189¥73,051¥ (5,335)¥80,011

Total changes during period
Balance at end of period

Accumulated other comprehensive income

Balance at beginning of period

Valuation difference
on available-for-salesecurities

Deferred gains orlosses on hedges

Foreign currencytranslation
adjustment

Remeasurementsof defined benefit
plans

Total accumulated
othercomprehensive
incomeShare
acquisitionrights¥12,116¥ (5)¥ (19)¥ (265)¥11,827¥310

Total net
assets¥94,278

Changes during period(4,743)

Dividends of surplus
Profit attributable to owners of parent

4,750

Purchase of treasury shares(2,347)

Disposal of treasury shares

211–

Transfer of loss on disposal of treasury shares–

Cancellation of treasury shares
Net changes in items other than shareholders’ equity(Breakdown)

Retained earnings¥4,181

Profit attributable to owners of parent(Breakdown)
Profit attributable to owners of parent

Capital surplus¥8,105

Changes during period

Balance at beginning of period

Extraordinary income:(Millions of yen)

Shareholders’ equity

Financial Report and Corporate Information

As of March 31, 2022

(1,532)

5

120

282

(1,124)(111)(1,235)

Total changes during period(1,532)

5

120

282

(1,124)(111)(3,364)

Balance at end of period¥10,583

¥–

¥101

¥17

¥10,702¥199¥90,913

SANKI REPORT 2023

97︱Financial Report and Corporate Information ︱Consolidated Statement of Cash Flows(Millions of yen)
Year ended March 31, 2022

Year ended March 31, 2023

¥9,514¥6,935

Year ended March 31, 2023

Cash flows from financing activities:

Cash flows from operating activities:
Profit before income taxes(Millions of yen)
Year ended March 31, 2022

Net increase (decrease) in short-term borrowings

0

258
1,750

1,587

1,511

Proceeds from long-term borrowings–

Impairment loss

22–

Repayments of long-term borrowings(1,390)(3,140)(1,438)(2,347)

Loss on retirement of non-current assets
Office relocation expenses
Increase (decrease) in provision for loss on business of subsidiaries and associates

114

189

Purchase of treasury shares

6

65

Proceeds from exercise of share options

140–

Repayments of lease obligations

0

0

(152)

(105)

3

(26)

Dividends paid

(4,537)(4,743)

Increase (decrease) in provision for bonuses

351

(42)

Cash flows from financing activities(7,518)(8,327)

Increase (decrease) in retirement benefit liability

726

799

9

23

Increase (decrease) in allowance for doubtful accounts

Increase (decrease) in provision for loss on construction contracts

(575)

(645)

Interest expense

112

98

Loss (gain) on sale of property, plant, and equipment

(0)

(22)

Loss (gain) on sale of investment securities(50)(1,027)

Loss on valuation of investment securities

77

31

5,389

(10,328)

Interest and dividend income

Decrease (increase) in trade receivables and contract assets
Decrease (increase) in costs on construction contracts in progress
Increase (decrease) in trade payables

(573)

125

(1,218)(3,793)

Increase (decrease) in contract liabilities

6,154

263

Increase (decrease) in other current liabilities

2,080(2,160)–139

Settlement payments
Other(4,324)

1,142

Subtotal

19,548(6,720)Interest and dividends received

575

645

Interest paid

(112)

(98)

Commitment fee payment

(10)

–

(1,839)(4,213)

Income taxes refund374

7

Office relocation expenses paid

(6)

(65)

Settlement paid

–

(139)

18,529(10,584)

Purchase of securities(19,000)(21,000)

Proceeds from redemption of securities

17,00021,000(1,010)(1,007)

Income taxes paid

Cash flows from operating activities

64

51

Net increase (decrease) in cash and cash equivalents

7,692(19,829)

Cash and cash equivalents at beginning of period

37,08744,779¥44,779¥24,949

Effect of exchange rate changes on cash and cash equivalents

Cash and cash equivalents at end of period

Financial Report and Corporate Information

Depreciation

Cash flows from investing activities:

Purchase of property, plant, and equipment
Proceeds from sale of property, plant, and equipment
Payments for retirement of property, plant, and equipment

76
(178)

Purchase of investment securities

(21)

(273)

Proceeds from sale of investment securities

182

1,503

Proceeds from collection of loans receivable

12

12

(529)

(1,185)20

20

Purchase of intangible assets
Subsidies received
Proceeds from maturity of insurance funds

304

555

Other

(225)

(491)

(3,384)(969)

Cash flows from investing activities

98

0
(117)

SANKI REPORT 2023

SANKI REPORT 2023

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︱Financial Report and Corporate Information ︱Corporate Information, Business Locations, and Group Companies(as of April 1, 2023)

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 agroup to contribute to the realization of a sustainable society.

Domestic Business Locations

Financial Report and Corporate Information

Corporate Information

Representative Offices and Group Companies Overseas

Company nameSanki Engineering Co., Ltd.
● Representative officeGroup company

Date of establishment
April 22, 1925

Hokkaido
branch office

Share capital
8,105.18 million yen
Representative
Hirokazu Ishida, President

Hokuriku branch officePrincipal lines of business
Facilities construction, plant and machinery
systems, real estate
Chugoku branch office

Offices

Ibaraki branch office

AEROSTRIP
Corporation
Sale of aeration systems

Kyushu branch office

Chiba branch office

Branches: 3

Head office
Tokyo branch

Branch offices: 15
Training center:1
Laboratory

Yokohama branch office

Factory: 1

Sanki Techno Center
R&D Center
Yamato Product Center

Mikawa branch
officeHead office
8-1 Akashi-cho, Chuo-ku, Tokyo
Shikoku branch officeKansai branch
Kobe branch
officeShizuoka branch office

Consolidated Subsidiaries

Austria Office
AQUACONSULT
Anlagenbau GmbH

THAI SANKI ENGINEERING &CONSTRUCTION CO., LTD.

Manufacture and saleof aeration systems

Facility design, construction,
maintenance and consulting

Affiliate Not Accounted for by the Equity Method

Non-consolidated Subsidiaries

Sanki Techno Support Co., Ltd.

Sanki Chemical Engineering & Construction Co., Ltd.

Sanki Partners Co., Ltd.

Tomakomai Netsu Service Co., Ltd.

Sendai Kankyo Hozen Co., Ltd.

PFI Okubo Techno Resource Co., Ltd.

Established: April 1, 1980
Capital: 100 million yen
Business areas:• Design, construction, operation/management,
repair and maintenance of HVAC, plumbingand electricity work
• Energy saving diagnosis and consulting• Building IP phone systems, call center systems
and networks

Established: September 1, 1980
Capital: 80 million yen
Business areas:• Design, construction, operation/management,
maintenance, upgrading and improving of waste
treatment facilities• Manufacture, sale and installation of solid-liquid
separators• Design, construction and maintenance/
management of water/wastewater treatment
facilities

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

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

Established: November 7, 2016
Capital: 100 million yen
Business areas:• Management of operation andmaintenance for the renovation workfor key facilities of the Sendai Clean
CenterEstablished: 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

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

100

Facility design, construction, maintenanceand consulting

Kanto branch office
Kyoto branch
officeNon-consolidated: 2,073

Sanki Construction Engineering(Shanghai) Co., Ltd.

Tohoku branch office

Chubu branch

SANKI REPORT 2023

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 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

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

CAD-KENDORO Co., Ltd.

Corporate Information, Business Locations, and Group Companies

Number of employees (as of March 31, 2023)
Consolidated: 2,627

Toyota branch office

Period of business:• 3 years and 4 months for design and construction; 20 years for
operation, maintenance and management

Stock acquired in July 2022
Capital: 3 million yen
Business areas:• Production of design drawings andconstruction drawings related to pipelaying works• Sales of CAD software and support
services• Site survey and 3D drawing by 3D
scanner

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101

︱

Third-Party Opinion ︱Third-Party Opinion

Yoshinao Kozuma
Professor Emeritus, Sophia University

1. The Path to Achieving Carbon Neutrality by 2050
Achieving carbon neutrality by 2050 has become a common
goal for our industrial society, and in February 2022 the SankiEngineering Group expressed its commitment to that objective
by announcing its Carbon-Neutral Declaration and launching afull-scale initiative for realizing a decarbonized society by 2050.
In reviewing the actual results more than a year after thisdeclaration, Sanki Engineering has achieved a 34% reduction in
its Scope 1 and 2 emissions from levels in fiscal 2020, ahead of
the target year of 2030, and is now on course to fully meet its
interim target of a 40% reduction by fiscal 2025. The Group has
also achieved a 36% reduction in Scope 3 emissions, exceeding
its interim target of a 10% reduction by fiscal 2025 toward thefinal deadline of fiscal 2050. Scope 3 emissions account for asmuch as 99.9% of the Sanki Engineering ’Group’s total emissions,and it is no exaggeration to say that the path to CN depends on
its strategy for reducing Scope 3 emissions. Moreover, since 91%of these emissions fall under Category 11, reducing use-phaseemissions of facilities and plants constructed by the Group isessential for transitioning to a decarbonized society. Through the
SANKI YOU Eco Contribution Points program, the Group links its
contributions to customer CO2 reductions with financial support
for afforestation projects. The Carbon-Neutral Declaration for2050 reminds us of how helpful this program has been for theGroup’s carbon risk management.
Sanki Engineering’s achievements for this fiscal year also
included being recognized as an A-list company by the CDP and
updating its TCFD scenario analysis to a 1.5°C scenario. Both ofthese are major achievements that deserve recognition.
Meanwhile, investors are increasingly demanding thatcompanies announcing their declarations for achieving carbon
neutrality by 2050 concretely explain the process of attaining
the goal with a transition plan, so Sanki Engineering should
formulate and publicly disclose its own plan as soon as possible.

2. Response to Human Rights Risk
Along with the formulation of its human rights policy in April
2022, Sanki Engineering also expressed its plans to implementhuman rights due diligence. This year, the Group clearly statedthat its entire supply chain will be subject to due diligence andthat the corporate ethics hotline and other contact points will
also receive reports of violations from the supply chain.
Considering the growing number of orders received outside
Japan, Sanki Engineering’s management stance of pursuinghigh standards in fulfilling its duty of care across the supply
chain is highly commendable. I expect the Group to concretely
implement human rights due diligence to further strengthen
its response to risks associated with business activities in theyears to come. It will also need to provide information on thecontact points for reporting from the supply chain on its English
language website.
3. Enhanced Quality of Information DisclosureThis fiscal year, the Group has continued to disclose important
new information. For example, it has explained its management
resources in greater detail in the diagram of its value creation
process, providing a more solid picture of the management
resources that constitute the Sanki Engineering Group’s businessmodel. In addition, while governance information tends to belimited to an explanation of facts, this year’s report includes a
dialogue between the president and an external director, which
vividly conveys the state of the governance system from thelatter’s perspective. These are all beneficial efforts in terms ofenhancing the quality of information disclosure.
4. Future Considerations
As for information on the gender wage gap, which became
a statutory disclosure requirement under the revised Act ofPromotion of Women’s Participation and Advancement in the
Workplace, the gap disclosed by the Group seems somewhat
large compared to the average in Japan, according to the OECD.
This might require disclosing additional information, including
the Group’s measures for closing the gap. With regard to thepending issue of improving the employment rate of persons
with disabilities, it is desirable to strengthen measures not
only on a non-consolidated basis but also and especially on aconsolidated basis, given that the statutory employment rate will
be raised in stages starting in 2024.

Response to Third-Party Opinion
We are deeply grateful for your valuable insights on the SANKI REPORT 2023.
This was the 12th year since we began publishing an integrated report, and we appreciate your evaluation of issues, such as ourpolicies and initiatives for achieving carbon neutrality and the enhanced quality of our information disclosure. Going forward, we will
endeavor to disclose concrete information, including our transition plan for achieving the 2050 carbon neutrality goal, while steadily
promoting the sustainability management of the Sanki Engineering Group.
We will work to make improvements in the areas you pointed out, including closing the wage gap between men and women andraising the employment rate of disabled persons. We are resolved to make the best use of the SANKI REPORT to further advance ourbusiness activities and help realize a sustainable society.
Takeshi Terazaki Executive Officer and General Manager, Management Planning Office

102

SANKI REPORT 2023