Industrial Machinery
Mechatronics

Logistics & Construction

Energy & Lifeline

Integrated Report
April 2021–March 2022

2022

Excellent Products
and Services
Creating a more vibrant world
through reliable technologies that
support manufacturing.
Editorial Policy
The Sumitomo Heavy Industries Group (SHI
Group) published an Integrated Report for
FY2017 in lieu of the Annual Report that it had
published since the 1970s. Integrated Report
2022 contains reports on financial information
as well as the SHI Group’s unique strengths andthe sources of its medium- to long-term growthwith the aim of deepening understanding
among a wide range of stakeholders, including
shareholders and investors.
Please refer to our website for detailed
information and figures related to financial data(including Securities Reports) and non-financial
data (such as sustainability data).
Scope of Report
This report covers Sumitomo Heavy Industries, Ltd., 146consolidated subsidiaries (39 in Japan, 107 overseas)
and 4 equity- method affiliates (1 in Japan, 3 overseas).
Context changes are duly noted in the text.

CONTENTS
2 To Our Stakeholders

SHI WAY
4 Growth History
6 Our Strengths
8 Value Creation Process
10 Message from the President

CAPITALS(The Sources of Our Strengths)
18 Manufacturing Capital
20 Intellectual Capital

SHI MATERIALITY
47 Sustainability at
the SHI Group
50 Addressing Climate
Change Risks
54 Corporate Governance57 Risk Management
58 Compliance
60 Directors,
Corporate Auditors, andExecutive Officers
63 Roundtable Discussion with
External Directors

22 Financial Capital
24 Human Capital

OUTCOME

29 Social Capital

70 Eleven-Year Summary and
Key Financial Data

Reference Guidelines

BUSINESS ACTIVITIES• “International Integrated Reporting Framework,”
International Integrated Reporting Council (IIRC)• “WICI Intangibles Reporting Framework Version 1.0,”
World Intellectual Capital Initiative• GRI Standards• “Guidance for Collaborative Value Creation,”
METI of Japan

31 Natural Capital

Positioning of Integrated Report 2022

36 The 4 Segments of SHI

Financial

38 Mechatronics
40 Industrial Machinery

Technical
Information

Non-Financial

Integrated Report 2022
Securities Reports

76 Corporate Data/
Stock-Related Information

Please refer to our website for detailed information and figures related to

Corporate Information

72 Non-Financial Key Data

CORPORATE DATA

Our Website

Corporate Governance Report

Interim Business Report“To Our Shareholders”

CSR Activities Report

Website “Investor Relations”

Website “Sustainability”

Sumitomo Heavy Industries
Technical Review

Timeline
This report covers FY2021 (April 1, 2021 to March 31,2022). Coverage of overseas subsidiaries is from January
1, 2021 to December 31, 2021 with the exception of two
companies. Some content makes references to dates
outside of this time period.

financial data (including Securities Reports and timely disclosure information) and non-financial data (Sustainability data, etc.).

Investor Relations

Sustainability

https://www.shi.co.jp/english/ir

https://www.shi.co.jp/english/csr

42 Logistics & Construction
44 Energy & Lifelines

Interim Business Report“To Our Shareholders”

Cautionary Note Concerning Forward-Looking Statements
This report includes forward-looking statements regarding the future performance of Sumitomo Heavy Industries, Ltd. These forward-looking statements are based on
information currently available to the Company and determined subjectively. All information contained herein is subject to changes in actual business performance.

Securities Reports

Corporate Governance
ReportSumitomo Heavy
Industries Technical
Review

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 1

To Our Stakeholders

The Sumitomo Heavy Industries (SHI) Group has

providing a variety of products and services that meet

evolved along with the development of society andthe demands of the times. We will continue to cater toindustry since it was established in 1888 as a ma-

the needs of our customers and provide products andchinery production and repair shop for the Besshi

services that address existing social issues. This will

Copper Mine, the founding business of the Sumitomo

help the Group to achieve sustainable development

Group. We are committed to fulfilling our corporate

and create enhanced corporate value, thereby meet-

mission in accordance with the Sumitomo Businessing the expectations of our shareholders, employees,

Philosophy, which serves as the common philosophy

and local communities.

of all companies under the Group. The Sumitomo
Business Philosophy is also highly compatible withIn Integrated Report 2022, we discuss our thoughts,

today’s environment where social skills are empha-

business strategies, and corporate social responsi-

sized, and it forms the basis of management for thebilities as we seek to fulfill our corporate mission.

SHI Group.

We also explain current business conditions and our
future outlook.

Based on its Corporate Mission Statement, which

Tetsuya Okamura

Shinji Shimomura

Representative Director,
Chairman of the Board

Representative Director,
President and CEO

The Sumitomo Heavy Industries Groupaims to achieve sustainable growthby contributing to the resolution of social issues
and embraces the challenge of transformation.
2 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

focuses on benefiting society through the provision of

We hope the report will help deepen your under-

excellent products and services, the Group has beenstanding of the SHI Group.

THE SUMITOMO BUSINESS PHILOSOPHYCORPORATE PHILOSOPHY

Business Philosophy

Corporate Mission Statement

Article 1
Sumitomo shall achieve strong and prosperity by placing prime importance on integrity and sound management in the conduct of its business.

We will aim to become a machinery manufacturer
that continues to provide excellent products and services to the world.
With integrity being a key principle in the Group,
we will contribute towards society by gaining highrespect and confidence from all stakeholders.

Article 2
Sumitomo shall manage its activities with foresightand flexibility in order to cope effectively with thechanging times. Under no circumstances, however,shall it pursue easy gains or act imprudently.

[Commentary]
1. Sumitomo shall achieve prosperity based on a solid foundationby placing prime importance on trust and reliability.
2. W
 e need to watch changes and aggressively pursue businessexpansion using our management resources but should not
behave hastily for an easy profit in any case.

Our Values

Customer FirstWe exceed customer expectations by providing sophisticated efficient products and services, giving the utmost consideration to their needs and requirements.

Embrace Changes
We will continue to drive and embrace changes without
accepting the status quo.

Commitment to Technology and Innovation
We are passionate about contributing to society by further
developing our unique, in-house technologies.

Respect People
We will nurture an organizational climate that fosters mutual
respect, tolerance and learning for growth.

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 3

Growth History“Medium Term Management Plan 2016”“Medium Term Management Plan 2019”“Medium Term Management Plan 2023”

Achieve “Steady Growth” Become a “High Profit
Company” Create excellent products and services
through “A Tireless Commitment to Improving
Operational Quality”

Pursue corporate mission

Achievements and Challenges

Achievements and Challenges

Progress and Challenges

 e accelerated globalization through the acquisition of SFW andW
aggressively invested in growth-oriented, high-margin businesses.

 e achieved steady growth and transformed ourselves into a highlyW
profitable company by our strengthening overseas business and service activities, making proactive investments, and engaging in M&As
and alliances.

Fiscal 2022 will be a nine-month accounting period due to a change in our fiscal year-end.
 iven the strong capital investments and demand for machinery, targets for fiscal 2023, the final year of the plan, have been revised upward from theGinitial plan.
 hallenges include the need for us to respond to an external environment that has evolved dramatically, including the heightened geopolitical risks,Cfragmentation of the global economy, spread of COVID-19, rapid depreciation of the yen, as well as supply chain disruptions due to supply-demand
imbalances, particularly in the area of semiconductors.

 e identified the material issues of the SHI Group and focused onW
CSR initiatives.

CAPITALS hrough aggressive growth-oriented investments, including in M&As, weTachieved our financial targets in fiscal 2018, the second year of the plan.
 e refocused our attention on improving our operational quality andWformulating a management policy that prioritizes compliance.

Targets and Results

Targets and Results

FY2016 Results¥700.0 billion¥674.3 billion

Net Sales

Operating Profit¥52.5 billion¥48.4 billion

ROIC

7.0% or more

7.3%

ROIC

Net Sales(%)(¥ billion)20

1,000.0

Target

FY2019 Results¥800.0 billion¥864.5 billion

Operating Profit¥60.0 billion¥56.8 billion

ROIC

7.5% or more

7.3%

Targets and Progress

Net Sales
Operating Profit

TargetFY2021 Results¥1,050.0 billion¥944.0 billion¥76.0 billion¥65.7 billion

7.5%

7.3%

ROIC

1888

1934

1999

2018

The Company was launched as amachinery production and repair shop
for the Besshi Copper Mine

Incorporated as Sumitomo MachineryCo., Ltd. (currently known as
Sumitomo Heavy Industries Co., Ltd.)

Employed ROIC early as a management index

Achieved new record highs in orders, net sales
and profit attributable to owners of parent

Operating Profit(¥ billion)

150.0

12

800.0

Reformed Business Principles and added
non-financial indexes to the performance
evaluation indexes

1969
Merged Sumitomo Machinery
Industries Co., Ltd. and Uraga Heavy
Industries Co., Ltd. to form Sumitomo
Heavy Industries, Ltd.

1897

600.0

120.0

SHI MATERIALITY

2015
16

BUSINESS ACTIVITIES

TargetNet Sales(The Sources of Our Strengths)

 e recognized the need to achieve steady growth based on a strictWassessment of the external environment, further enhance our profitability with a view to becoming a highly profitable corporate entity, andfurther improve our operational quality.

SHI WAY e achieved our initial financial targets for net sales and ROIC in fiscalW
2015, the second year of the plan.

Enhance corporate value in a sustainable manner by solving social issues through products and services

90.0

Incorporated as Uraga Dock Co., Ltd.

60.0

400.0

OUTCOME

8

*

200.0

0

0

30.0

1888

1900

1950

1970

1980

1990

2000

2010

2020 2021 2022 2023 (FY)0

Results Forecast Target
forecast for a twelve-monthaccounting period*converted from a nine-month accounting period

4 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 5

CORPORATE DATA

4

Our Strengths

Sustainability Plus products*2

Stockholders’Equity Ratio

Net Interest-Bearing
Debt Ratio

ROIC(Return on invested capital)

50.4 %

2.1 %

7.3 %

6 models
25 models

BUSINESS ACTIVITIESSuper Sustainability Plus products*1

Page 20 / Page 34

Page 22

CAPITALSTechnology development capabilities that
support the top-rank position

Creating a structure for ensuring profitability(The Sources of Our Strengths)

1

Excellent technological capabilities andintegrated strengths that contribute to
the sustainable development of society

2

Superior management capabilities
that create social value andcorporate value

SHI WAY

Since its establishment in 1888, the SHI Group has worked to tackle the problems faced by customers and society byproviding products and services as a manufacturing company. The strengths of our Group lie in our superior technological, management, and organizational capabilities that we have built up over the course of our extensive history.
We will continue to draw on these strengths as sources of greater competitiveness and strive to achieve further
growth in the future.

SHI MATERIALITY*1: Score of 90 or higher (based on proprietary evaluation)*2: Score of 80 or higher (based on proprietary evaluation)
See page 34 for more details.

Organizational capabilities that spur innovation

Page 29

OUTCOME3

A corporate culture that continues
to embrace the challenge oftransformation

CORPORATE DATA

6 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 7

Value Creation Process

SHI WAY

The SHI Group helps create value for customers and contributes to the sustainable development of society by leveraging its advanced technological capabilities and integrated strengths to provide excellent products and services.
The corporate culture of always embracing new challenges that we have cultivated over the years has made thispossible. We will continue working to enhance our corporate value by making full use of our superior management
capabilities to create social value and corporate value.

OUTCOME

BUSINESSACTIVITIESCAPITALS

Priority issues forvalue creation

STRENGTH(The Sources of
Our Strengths)

Current
globaltrendsFinancial
CapitalHuman
CapitalSocialCapitalIndustrial
Machinery
Superior management capabilities
that create social
value and corporate
value

Logistics&
Construction
A corporate
culture of always
embracing newchallenges

Energy&Lifelines

Ensure highproduct quality
Prioritize employee
safety, health,and development

Automation of
products to save
manpower

Creation ofsharedvalue

Enhance laborproductivity andsafety for clients

Emphasize
coexistence andco-prosperity withlocal communities
Strengthen
governance
Enhance
information
disclosure

Priority issues for strengthening
our business foundation

Application ofadvanced technologies (beam control,
cryogenics, vacuum
technology, etc.)

OUTCOME

NaturalCapitalCreate better ways
to live and work

Foster well-being
and improve
quality of life

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 9

CORPORATE DATA

SDGs whose
achievement the SHIGroup is committed to

8 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

SHI MATERIALITY

Environmentalandsocial issues

Intellectual
CapitalMechatronics

Optimization of
products toconserve energy
and resources

Contribute to action against climatechange and thecreation of arecycling-oriented
society

BUSINESS ACTIVITIESManufacturing
CapitalAdvanced technological capabilities
and collective
strengths that
contribute to thesustainable development of society

Reduceenvironmental
burdenCAPITALSSHIMATERIALITY(The Sources of Our Strengths)

OUTPUT

Message from the President

Understanding the Business Environment

2021 to 2023

Factored in when MTMP 23 was formulated• Rapid progress of ESG action• China becomes more influential in terms of economy and security• Increase in value of information Progress of DX• Prolonged Covid 19 pandemic• Expansion and materialization of exogenous risks

Enhance corporate value in a sustainable mannerby solving social issues through products and services

Objective

Topics for FY2021• COP26 agreement (commitment to GHG net zero emissions)• China: economic downturn, zero coronavirus policy and “Taiwanrisk” + Russia’s aggression against Ukraine• Prolonged imbalance between supply and demand of semiconductors and strengthening of production of strategic materials in own
country: spread of the bloc economy and non globalization• Continued spread of COVID 19 and shifting to the “With Corona”
approach• Rapid shift from deflation to inflation• Rapid depreciation of the yen

Global spread of
the bloc economy
China risk

Shift to inflation
Rising interest rate
Weaker yen

Improving laborproductivity

Increase inproduction costs

Revise prices toensure profits

Increase incapital costs

Expand services formaking BS more efficient

Issues ofsustainable growthRoll out new products bypromoting productdevelopment inthe“Environment/Energy”
and “DX/Automation”
fields• Competitive advantage• Monetization ofsocial value• Review of portfolio

Create synergy between
new segments“Selection
and concentration”

Medium-Term Management Plan 2023 (MTMP23)

In fiscal 2021, orders received
were ¥1,075.3
billion,Industrial
Machinery
net sales were ¥944 billion, operating profit was ¥65.7
Applications based on
billion,cutting edge
physics and profit attributable to owners of parent was¥44.1 billion. Both orders received and net sales set
Responding toclimate changes

Improving conveniencenie
Advanced material
through application ofprocessing solutions
cutting-edge technology

record highs. Orders, net sales, and operating profit
increased year-on-year in all segments.
The main reason for this is that the demand for machinery, which had been stagnant in 2020 due to the
COVID-19 pandemic, turned around in 2021 and started
Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 11

CORPORATE DATA

Drive solutions

Response＋

Fiscal 2021 Results
Mechatronics

Identification of
focus areas
and regions“Selection andconcentration”

Business issue

OUTCOME

However, delving a little deeper, I see that in addition
to technology for controlling the movement
ofa system
machinDevelop
Bring the ideal
the foundations
ery, other distinctiveLaycharacteristics
ofwiththea business
SHI Group
portfoliostate into existence
for solving social issues
for solving social
issuesinclude improving productivity and increasing
customervalue through the Group’s products and our quest for
optimizations aimed at solutions such as reducing thedefect rate. Creating customer value through control
and optimization to deliver solutions to social issues is
how the Group creates social value, and is our reason
for existence.
With this goal of creating social value based on control and optimization, the SHI Group has drawn up avision for 2030, and is currently striving to get closer
to our goal and vision by executing our Medium-Term
Management Plan 2023 (MTMP23), which we created by“backcasting” from our 2030 vision.

Robotics actuators

10 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Impact on business

SHI MATERIALITY

Long-term
objective

Because the SHI Group offers such a wide range of
products, it is difficult to characterize us in one word.
Even lumping together all the Group’s machinery manufacturers, the types of products we handle and the businesses we target are diverse, including gear reducers
for industrial use, plastics machinery used in factories,
hydraulic excavators and mobile cranes that are widelyused at construction sites, industrial cranes used for material handling in ports, and biomass-fueled power generation facilities. If I had to characterize us, I would say
we are a company that excels at controlling the movement of machinery. Going forward, we will continue tohone our skills in these fields, and continue to maintainour basic stance of contributing to our customers andsociety through products and services made possible
by our technological capabilities. In addition, we willcontinue to pursue the path of monozukuri (excellencein manufacturing).

2030

BUSINESS ACTIVITIESThe SHI Group’s Purpose and Vision

Factoring in of external environments
2024 to 2029

CAPITALS

Representative Director,
President and CEO(The Sources of Our Strengths)

Shinji Shimomura

Medium Term Management
Plan 2023

Change (COP26) was held, which had a significant
impact in the environmental field. At the event, limiting
the increase in global average temperature to 1.5 degrees Celsius was recognized as a new common goal
for the world. As a result, countries are now effectively
obligated to promote various GHG (greenhouse gas)emission reduction initiatives to achieve their targets,and it is imperative that corporations take action as well.
Then, in 2022, Russia’s invasion of Ukraine began,bringing about soaring energy prices, a rapid shift fromdeflation to inflation, the division of the world economy into blocs due to increased country risk, and rapid
depreciation of the yen, among other consequencesthat are likely to have medium- and long-term impacts.
Looking at the global situation, there is a possibility offurther decoupling, and the possibility of a worldwide
recession with developing countries at the epicentercannot be ruled out, making the situation extremely
unstable and risky.

While there have been no major changes in ongoing
megatrends such as rapid urbanization, climate change,
resource scarcity, and demographic change, following
the COVID-19 pandemic that began in 2020, the years
2021 and 2022 brought changes in the external environment that could have a long-lasting impact on theGroup’s performance.
With respect to the COVID-19 pandemic, thanks inpart to the effects of multiple rounds of vaccinations
and therapeutic drug approvals, economic activity inEurope and the United States has recovered to roughly
pre-COVID levels. China, on the other hand, is experiencing intermittent city lockdowns, and there aredeveloping countries where vaccination is not yet widespread. Looking at the world as a whole, it is believedthat rather than defeating the virus, we are moving
towards an era of coexistence with COVID.
In 2021, the 26th Conference of the Parties to theUnited Nations Framework Convention on Climate

SHI WAY

Create customer value
through control andoptimization to deliver
solutions to social issues

Message from the President

improve sales and profits.

2022

January to March

Financial targets
Unit: JPY billion

Actual FY2021

813.9
849.1
51.3
6.0%
6.1%
JPY106
5.6%

1,075.3
944.0
65.7
7.0%
7.3%
JPY112
8.5%

880.0
850.0
51.0
6.0%
7.0%
JPY120
7.2%[Reference] Forecast
FY2022 (12 months)

FY2023 targets*

FY2023 targets*(as of May 2021)(as of May 2022)

1,030.0
1,010.0
64.0
6.3%—
JPY120—1,000.0
970.0
70.0
7.2%
7.5%
JPY1008.0%

1,070.0
1,050.0
76.0
7.2%
7.5%
JPY120
8.0%* Revise the 2023 targets because of a change of the closing date
As of May 2021: Apr. 2023 to Mar. 2024 ,As of May 2022: Jan. 2023 to Dec. 2023

Outlook for Fiscal 2022

12 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

In terms of business performance, although changes
in the external environment are beginning to affectsome orders, and we need to pay close attention todevelopments in the Logistics & Construction segment,
which is heavily influenced by China and other countries
where the future is unpredictable, I expect the performance of the Company as a whole to remain relatively
robust, given that we already have a substantial backlogof orders and considering the fact that the impact of

3Q

1H of FY2022

Domestic

2H of FY2022

FY2022 Domestic 9 months[Reference] FY2022 Domestic 12 months
1Q

2Q

Overseas

1H of FY2022

3Q
2H of FY2022

FY2022 Overseas 12 months

Performance Forecast for FY2022
Unit: JPY billion

Actual FY2020

Actual FY2021(2020.4-2021.3)(2021.4-2022.3)

813.9
849.1
51.3
6.0%
49.5
5.8%
(5.8)

1,075.3
944.0
65.7
7.0%
64.8
6.9%
(2.5)

26.8

44.1

Orders
Net sales
Operating profit
Operating profit ratio
Ordinary profit
Ordinary profit ratio
Extraordinary loss
Profit attributable toowners of parent
Profit ratio attributable toowners of parent
Dividend per share
Dividend payout ratio
ROIC (after Tax)
[Ref.] ROE
Currency exchange rate
(US dollars)

Forecast FY2022(Domestic 9 months)[Reference] Forecast FY2022(Domestic 12 months)(Apr. 2022-Dec. 2022)(Apr. 2022-Mar. 2023)

880.0
850.0
51.0
6.0%
49.0
5.8%
(2.0)

1,030.0
1,010.0
64.0
6.3%
62.0
6.1%
(2.0)

30.0

39.0

3.2%

4.7%

3.5%

3.9%

JPY65
29.8%
6.1%
5.6%

JPY115
32.0%
7.3%
8.5%

JPY90
36.8%
7.0%
7.2%

—
—
—
—

JPY106

JPY112

JPY120

JPY120Progress on MTMP23
The MTMP23, which started in fiscal 2021, defines the social issues that need to be resolved by 2030 and the ideal
state of our Group, and then “backcasting” from there,
defines what we should be doing now, with the major
goal of laying the foundation for solving social issues.
A major theme in pursuing this goal is how to balance
the expansion of corporate value in the Group with the
expansion of social value through promotion of CSV(creating social value by solving social issues throughproducts and services).
The most important thing is to create the capabilities
and systems to create products of unprecedented value.
In the past, we have developed a variety of businesses
under the banner of the “value chain,” but so far, wehaven’t grown as much as I’d like. In the MTMP23, byradically reassessing our portfolio and setting a direction
for the future, we aim to create a real value chain andcreate new products through new combinations. I believe
Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 13

CORPORATE DATA

In fiscal 2022, in order to unify the accounting periods
within the Group, the Company and its subsidiaries inJapan will shift their fiscal year-end to December. As
a consequence, the Company and its subsidiaries inJapan will have a nine-month accounting period from
April 2022 to December 2022, while its overseas subsidiaries will have a twelve-month accounting period fromJanuary 2022 to December 2022.

2Q

January to MarchOUTCOME

Orders
Net sales
Operating profit
Operating profit ratio
ROIC
Exchange rate (dollars)[Reference] ROE

Actual FY2020

Forecast FY2022(9 months)

1Q

October to December

SHI MATERIALITY

There are also transportation problems, which originated on the West Coast of the United States and have notyet been completely resolved due to port issues in the
Netherlands and port and land transportation disruptions caused by lockdowns in the Shanghai area. Rising
air freight rates have also had an impact.
In addition, I am concerned about the low growth inoperating profit, as well as issues related to sales. Heretoo, supply chain problems, such as rising prices of raw
materials and procured goods and the effects of tightsupply and demand, are the main factors. As for future
measures, in addition to switching procurement methods, we intend to perform drastic reviews of raw materials and procured goods at the time of design among
other medium- to long-term measures.

July to September

BUSINESS ACTIVITIES

to increase globally. Orders received exceeded thetarget of ¥1 trillion for the final year of the MTMP23.
However, this was partly due to last-minute orders from
customers, and it is uncertain whether we will be able toachieve annual orders exceeding ¥1 trillion in fiscal 2022
and beyond.
While orders have grown more than expected, net
sales did not necessarily grow accordingly. Several
problems in the supply chain are contributing factors.
One is the problem of semiconductor procurement.
Anticipating that this problem will continue, we are taking measures such as strengthening our buying powerby switching from procurement at the business divisionlevel, which we have traditionally done, to centralized
procurement at the Headquarters Procurement Office.

2023

April to June

CAPITALS

Change in Fiscal Year End (Financial Year 2022 End)

(The Sources of Our Strengths)

ending December 31, 2022), we are forecasting ordersof ¥880 billion, net sales of ¥850 billion, operating profitof ¥51 billion, and profit attributable to owners of parentof ¥30 billion. These figures incorporate cost-increasing
factors that can be ascertained at this point in time, but
do not incorporate prolonged supply chain disruptions,further deterioration in conditions, geopolitical risks, or
the re-emergence of infectious diseases, so it is necessary to monitor the situation carefully.

SHI WAY

We will address supply chain issues tothe changeover in our fiscal year-end will be over at the
beginning of 2023.
In terms of orders received, excluding Logistics &Construction, the three divisions of Mechatronics,
Industrial Machinery, and Energy & Lifeline are expected to maintain the same level as the previous year,
whereas for net sales, I expect an increase as progressin resolving procurement issues moves forward.
As a result of these factors, in fiscal 2022 (the fiscal year

Message from the President• Rapid progress of ESG action• China becomes more influential in terms of economy and security• Increase in value of information
DevelopProgressa system of DX
Bring the ideal
Lay •thefoundations
Prolonged
Covid 19 pandemic
with a business portfolio• Expansion
and materialization of exogenous risksstate into existence
for solvingsocial issues

China risk

Topics for FY2021

Response

Increase in

Global spread of
the bloc economy
China risk

Shift to inflation
Expand services for

Topicsfor FY2021 making
Initiatives
toBStheRising interest rate (E)capital costs Related
more Environment
efficient

for solving social issues• COP26 agreement (commitment to GHG net zero emissions)• China: economic downturn, zero coronavirus policy and “Taiwanrisk” + Russia’s aggression against Ukraine• Prolonged imbalance between supply and demand of semiconductors and strengthening of production of strategic materials in own
country: spread of the bloc economy and non globalization• Continued spread of COVID 19 and shifting to the “With Corona”
Based onthis idea, the MTMP23 promotes the goals
approachof solvingsocialthroughproducts and services,• Rapid
shiftissues
from deflation
to inflation• Rapid depreciation of the yen

Business issue• Rapid progress of ESG action• China becomes more influential in terms of economy and security• Increase in value of information Progress of DX
Increase in
Revise prices to• Prolonged Covid 19 pandemic
production
ensure profits
Global spreadof• Expansion
and materializationof costs
exogenous risks
the bloc economy

Weaker yen• COP26 agreement (commitment to GHG net zero emissions)
We haveendorsed the TCFD and have declared our
Shift to inflation • China: economic downturn,zero coronavirus policy and “Taiwan
Rising interest rate risk” + Russia’s aggression
againstemissionsby 50%
intention
to Ukraine
reduce Roll
CO2outnew products
by for Scope 1
Weaker yen• Prolonged imbalance between supply and demandpromotingof semiconducproduct to FY2019
Identification
and
2
and
30%
for
Scope
3
comparedemis-ofof of strategic materials
tors and strengthening Issuesof productionin own indevelopment
focus areas
growthcountry: spread ofsustainable
the bloc
andnonthenglobalization
sions
byeconomy
2030
andbecome carbon neutral
2050.
andby
regions
the“Environment/Energy”• Continued
spread of COVID 19 and shifting to the “With Corona”“Selection
andIdentificationofand “DX/Automation”
Asaspecific
initiative,
wehave
reviewed
ourbusinessapproachconcentration”• Competitive advantage
focus areas
fields
•
Rapid
shift
from
deflationtoinflation
relatedtoboilers,which
generatesignificant
emissions.
• Monetization ofand regions• Rapidof thevalue
yen“Selection
and depreciationsocial
concentration”

Initiatives Related to Society (S)Industrial Machinery

Mechatronics

Improvingenergy efficiency

Machinery withelectric/autonomous
operation mechanism

Energy & Lifelines
Energy & Lifelines
14 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Logistics & Construction

infrastructure upgrading

Machinery withelectric/autonomous
operation mechanism

Initiatives Related to Governance (G)With regard to governance (G), we are promoting diversity at the management level. In June 2021, a woman
Logistics& Construction
was appointed
as anexternal corporate auditor. In
April 2022, one new non-Japanese Vice President wasappointed, bringing the number of non-Japanese Vice

Increase incapital costs

Expand services formaking BS more efficient

Roll out
new products
products. For products
whose
use canby
be expected topromoting producthaveIssues
furtherenergy-saving
benefits,such
as motors withofdevelopment insustainablegrowthinverter control, wethe“Environment/Energy”
will tout these benefits as a sellingand “DX/Automation”
point and actively expand
sales.
• Competitive advantage
fieldsIn addition• Monetizationof to this, we intend to reduce the negativesocialvalue
environmental impactof ourGroup’s
products during
Createsynergy
between• Review of portfolio
newefficiency
segments“Selection
use by improving theirand fuel consumption,and concentration”
and to contribute to reducing workloads at our customers’ manufacturing sites by improving automation andconvenience, and we are strengthening our productdevelopment by focusing on these areas.

generation of work.
However, I believe that developing employees whowill contribute to the enhancement of corporate value
and social value is about more than just building up
their skills; it is also important for Group employees tofeel a sense of meaning and motivation in their work,and to take a positive attitude toward increasing value.
Therefore, as part of our organizational development
activities, we are promoting the PRIDE PROJECT (seepage 26 for details). We conduct employee awarenesssurveys to see how employees’ motivation has changed
as a result of our activities, and we make necessary
improvements based on the survey results.

Presidents to two. By promoting diversity in genderand nationality in this way, we will create a system that
can incorporate and reflect diverse opinions, thereby
strengthening the foundation that supports the sustainable growth of the Company.

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 15

CORPORATE DATAResource regeneration/
new material solutions

Responding to
infrastructure upgradingenergy efficiency
Cutting edge
logistics solutions
Resource regeneration/
new material solutions

Revise prices toensure profits

OUTCOMEWe are strengthening our human resource initiatives
Applications based onfrom a social perspective. Specifically, we are developRobotics actuators
cutting edge physics
Industrial
Machinerying and introducing systems to support efficient work
Applications based onstyles and nursing care and childcare through work style
Robotics actuators
Responding to
cutting edge physics
reforms. At the same time, as an investment in humanclimate changes Improving conveniencenie
Advanced material
Improvinglaborthrough application ofresources, we are increasing training opportunities for
Drive solutions
processing solutions
Responding to
productivity
cutting-edge technology
new employees, executive education, and other career
climate changes Improving conveniencenie
Advanced material
stage-based training. In the future, as DX (digital transImproving laborthrough application of
Taking on
processing solutions
productivity
Enhancedsocialvalue
Bringingformation) permeates companies, the qualities and skills
cutting-edge technology
challenges towell-being to life
required of employees are expected to change significircular economy
Taking on
Enhancedsocialvalue
Bringing
cantly. Cutting
We aretherefore actively reskilling our employRenewableedge
challenges to
ImprovingResponding towell-being
to lifeenergysystems
logistics
solutions
ees
to
equip
them
with the skills needed for the next
circular economy

Increase inproduction costs

SHI MATERIALITY

enhancing our capabilities to respond to environmental
and climate change issues, and applying the Task Forceon Climate-related Financial Disclosures (TCFD) frame＋
work in the management of climate-related risks andopportunities and disclosure of information.

We have decided toCreatestop accepting
new orders forsynergy between
segments“Selection
boilers that use coalnew
as themain fuel, including at ourand concentration”
Group company SFW. The ＋
goal is to reduce emissions
by preventing the use of such emissions-intensive• Review of portfolio

Response

BUSINESS ACTIVITIES

Renewableenergy systems

Enhance corporate value in a sustainable mannerinissues
when
MTMP
23 wasformulated
byFactored
solving social
throughproducts
and services

financialvalue
and social value.
Factored in when
MTMP 23 wasformulated

Impact on businessBusiness issue

CAPITALS

Drive solutions

corporate value in termsof both
Impact on business(The Sources of Our Strengths)

The SHI Group has shifted from its previous emphasis
on financial value to a stance that also considers theprovision of value from an ESG perspective. We are
therefore working to maximize corporate value in termsof both financial value and social value. With regard to
the promotion of sustainability, we aim to solve social
issues through our corporate activities, in other words,
to contribute to society through the promotion of CSV.

2030

Factoring in of external environments

state into existence

Sustainability Initiatives

Mechatronics

2021 to 2023

We are working to maximize
Factoring in of external environments

2024 to 2029

SHI WAYfor solving social issues

Medium Term Management
Plan 2023

Objective

Objective

for solving social issues

with a business portfolio

addition to tracking the ROIC, I believe it is also important to reduce the denominator of ROIC by managing
and evaluating each business according to appropriate
indicators, and by increasing the efficiency of the asset
side of the balance sheet for the Group as a whole.

Long-term
objective

Long-term
objective

we were able to make some progress in this direction in
fiscal 2021. We will continue to build on this foundation,
stepping up our efforts in fiscal 2022 and 2023.
At the same time, I believe we need to further evolve
our ROIC management, which has been in operation fornearly 20 years. ROIC does not simply look at the profitability of the current business, but depending on how
it is broken down, it is possible to see what areas should
Medium Term Management
be profitable
and which businesses will be profitable.
Plan 2023
2024 to 2029
2030
By devising2021 toways
2023 to set KPIs for the intermediate stages
leading to ROIC, we will develop a more advanced form
Enhance corporate value in a sustainable mannerof ROIC management that it takes into consideration
by solving social issues through products and services
the time horizon and growth potential of businesses.
Because the business environment, market, and comDevelop a system
petitivebusiness,the ideal in
Lay environment
the foundations differ from business to BringMessage from the President

Toward Sustainable GrowthFiscal 2021 was a fruitful year, with orders exceeding ¥1
trillion yen. Fortunately, in the first quarter of fiscal 2022,
orders in the overseas machinery market remain strong,which suggests that our fiscal 2022 performance may berelatively robust as well.
However, it is also true that the business environment
is changing faster and more intensely, making it moredifficult to predict. In particular, with regard to the zero
COVID policy in China and the issue of Russia’s invasionof Ukraine, there is no way of knowing how the situation
will end. Even under these circumstances, our successin fiscal 2022 depends on how we resolve supply chain
issues, particularly procurement issues.
On the other hand, the MTMP23 is only the first step
toward our vision for 2030. To achieve this vision, it isnecessary to review our business portfolio to realize

synergies within new segments and develop products
and services that will lead to new growth, and fiscal
2022 is the cornerstone year for achieving these goals.
Under these circumstances, non-financial initiatives
are also important to achieve sustainable growth as acompany. In addition to addressing fundamental issues
such as employee safety, health, and development, we
will simultaneously implement initiatives to realize better
lifestyles and work styles and reduce our environmental
impact. At the same time, we will actively communicate
more than ever how we are approaching environmental
issues and the utilization of human resources. Throughthese efforts, we will promote value creation initiatives
that balance both economic and social value and lead tosustainable growth.

CAPITALS(The Sources of Our Strengths)

Ever since it was established in 1888 to handle the operations at the Besshi Copper Mine,
which constituted the original core business of the Sumitomo Group, the SHI Group has
accompanied the evolution of our society and industry. The diverse forms of capital wehave accumulated over the course of our extensive history now serve as the businessfoundation of our Group and the source of our strengths. We endeavor to achieve further
growth for our Group by integrating these forms of capital in an organic way and maximize
the value we can draw from them over the medium to long term.

CAPITALSSTRENGTH

BUSINESSACTIVITIES(The Sources of
Our Strengths)

Manufacturing
CapitalIntellectual
CapitalFinancial
CapitalHuman
CapitalRepresentative Director,
President and CEO

SocialCapitalNaturalCapitalAdvanced
technologicalcapabilities andcollective strengths
that contribute to
the sustainable
development ofsociety

Superior
management
capabilities thatcreate social
value andcorporate value

Mechatronics

Reduceenvironmental
burdenOptimization of
products toconserve energy
and resources

Ensurehighproduct
quality

Industrial
Machinery

Energy&Lifelines

OUTCOME

Priority issues
for value creation

Createbetterways to live
and work

Logistics&
Construction
A corporate
culture ofalwaysembracing newchallenges

OUTPUTSHI
MATERIALITY

Prioritize
employee safety,
health, anddevelopment

Automation of
products tosave manpower

Contribute toaction against
climate change andthe creation of arecycling-oriented
societyEnhance laborproductivity
and safety
for clients

Creationof sharedvalue

Emphasize
coexistence
and co-prosperity
with local
communities

Applicationof advanced
technologies(beam control,
cryogenics, vacuum
technology,etc.)Strengthen
governance

Enhance
information
disclosure

Foster well-being
and improve
quality of life

Priority issues for strengthening
our business foundation

16 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 17

The Sources of Our Strengths/

Manufacturing Capital

Meeting diverse needs with our global production systemand quality control system

7

Major domestic
subsidiaries’
manufacturing companies:

30

117 billion yen

SHI Group Quality Policy
Quality Principles
Through the continuous and unwavering pursuit of worldclass quality that is recognized globally, we will supply

A Production System That Aims to Supply First-Class Products to the World

Quality Policy
Customer First: Define quality targets based on the expectations of the customer

Continuous Progress: Continuously advance the quality system and incorporate quality with a process mindset
Everyone Participates: Every person involved in quality sets an objective and tackles quality issues head-on as a team* Includes QMS certifications such as JIS Q 9100 adapted for aerospace equipment, ISO 13485 adapted for medical
devices, etc.

Focused Investment in Businesses We Seek to Expand

A new plant for the SHI Group’s plastics
machinery business(Construction completed in July 2021)

18 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 19

CORPORATE DATA

We are aggressively investing in businesses that we seek to expand moving
forward, especially our businesses in the areas of semiconductors and plastics
machinery in the Industrial Machinery segment, as well as electric motor control
systems and precision gears in the Mechatronics segment.

Rigorous quality complianceA section on “Prohibition of inappropriate conduct inquality control” has been included in our Compliance
Manual, which outlines the various laws, regulations,and specific action guidelines that must be observed
by our Group’s employees in order to ensure that everyone in our Group is fully aware of the importance ofquality compliance. In addition, we have been working
to strengthen our quality control processes and quality
audit system as well as enhance compliance throughcompliance education on an ongoing basis as part of ourefforts to prevent the recurrence of inappropriate conduct in quality control that had taken place in the past.

OUTCOME

Setting up an employee education system
The SHI Group considers the assurance of productsafety and quality to be a key priority that all employees should be deeply conscious of. In general, quality
control education will be conducted for all new employees (including new graduates and career hires) when
they join the company. We have also introduced the Six
Sigma, an internationally recognized process improvement approach, as our shared quality reform framework,
and we conduct practical education every year to raiseawareness of this concept throughout our Group. In
fiscal 2021, 57 employees have completed the Six Sigma
education module.

Manufacturing site inspection by the
Representative Director, President & CEO

SHI MATERIALITY

Evolving our quality management system through audits
Each of our operating divisions has been working on obtaining ISO 9001* and otherquality management system (QMS) certifications. (As of August 2022, approximately
93% of our Group’s major manufacturing divisions have obtained these certifications.) In addition, the Corporate Quality Group, which oversees quality within ourGroup, conducts QMS audits of each operating division annually in the form of internal audits. The President & CEO also visits major business sites every year to inspect
our manufacturing sites and hold dialogues with operational managers to discuss
quality- and production-related issues and promote the evolution of our quality
management processes.

BUSINESS ACTIVITIESThe SHI Group seeks to establish a robust and optimal production system in order to meet diversifying client needs
and fluctuating demand in an appropriate manner. In addition to setting up the necessary global production bases bytaking into account our shipping destinations and other factors, we have been constantly working to raise production
capacity through the construction of new plants and improve production efficiency through improvements that takeadvantage of automation, labor-saving technologies, and better layouts.

customers with products and services that they recognize as adding value to their business.

CAPITALS(Total capital investment under the previous MTMP over three years: 127.6 billion yen)

our key sustainability issues in order to ensure the safety
and quality of products across the SHI Group. We aremaking every effort to ensure the safety of each productby taking into account the attributes of our various products as well as the wide range of customers who use our
products or are involved in them in other ways.

(The Sources of Our Strengths)

Total capital investment (MTMP2023)
over three years (planned):

18

Major overseas
subsidiaries’
manufacturing companies:

As an integrated machinery manufacturer, we believethat it is our responsibility to contribute to society by providing a stable supply of high-quality, safe, and reliable
products and services that satisfy our customers. In viewof this, we have established a group-wide quality policy
and identified the assurance of product quality as one of

SHI WAY

Domestic
manufacturing
divisions:

Ensuring Product Safety and Product Quality

Intellectual Capital

The Sources of Our Strengths/

Strengthening our product capabilities to achieve sustainable growthIntellectual property activities aimed
at creating a competitive advantage

7,405

Number of patents
obtained overseas:

3,613

Senior Managing Executive Officer & General Manager, Corporate Technology Management GroupWe are aggressively pursuing R&D in growth sectors with the aim of building a resilient
enterprise and playing a role in tackling social issues through our products and services.
We are focused on R&D based on a longer time horizon by keeping a close eye onmarkets, megatrends, and our clients. We also emphasize intellectual property as asource of competitive advantage for the SHI Group, and we seek to promote intellectual
property activities in conjunction with our R&D efforts.

Advancedmaterial
processing
Businesssolutions&Li

Bringing
well-being
to life

fe

li n

es

Lo

A ut

o m a tion / d i g i t a li z a

c ti
tru

gy

Taking on
challenges tocirculareconomyMachinerywith electricautonomous
operationmechanism

ns

Resource
regeneration/
new material
solutionsCo

Responding
to infrastructure
upgradingCutting edge
logistics
solutionstgisti o n

ics

&

2017

2018

2019

2020

2021

2022 (fiscal year)(projected)* Actual figures are based on P/L, while projections are based on corporate decisions.

Development Strategy
Management Dept.

Intellectual Property Dept.
ChangeProduction
Engineering Centera shapeTechnology Research Center

Supportthe lives ofpeople64.0Intellectual Property Strategy
7.0*

7.5

With a focus on creating (producing intellectual property), attacking (utilizing intellectual property), and0
20182023 (FY)20172019
2020rights
2021
2022 companies),
defending(respecting
theof other(forecast) (forecast)
we actively work on a unifiedbasis
tocreate,protect,* forecast converted from a nine-month accounting period
andutilize
intellectual
property.
To
establishadirectOperating income (left)
ROIC (right)
R&D expenses
connection
between senior management in business(100 million
yen)
202
200
200
divisions and intellectual property activities, we haveappointed chief intellectual property officers (CIPO) in150
each division. Our Intellectual Property Department
100
also participates in the intellectual property activities
50
of each division in all respects and conducts activities
aimed at allowing different divisions to share their
0
year)
2018
2017
2019
2020
2022 (fiscal
respective
experiencesinorder2021
to enhance
intellectual(projected)
property value from a medium- to long-term standpoint* Actual figures are based on P/L, while projections are based on corporate decisions.
and further vitalize related activities at the division level.
In order to establish superiority in development ofoverseas business, we are actively working to raise theoverseas acquisition ratio of patent rights. As part of our
20.0Intellectual Property Dept.
Production Engineering Center

15
10
5
0

social contribution efforts, in recent years we have also
been focusing on licensing and transfers and making
more effective use of our intellectual property rights.

Acquisition of Patent Rights(Patents)

(%)

48.7

7,500

7,405

50.0

3,792
5,000
45.0 forecasts)
Operating profit and ROIC (FY2022–2023, including(¥ billion)
80.0

76.0
65.7

2,500
60.0
40.0
20.0
0

0

2017

2018

2019

2020

64.0
3,613

40.0

7.3
7.0* 35.0
7.52021 (FY)

Total number of patents (left)(
Number of overseas patents acquired)2018
2023 (FY)
2017
2019
2020
2021
2022
Ratio of overseas patents (right)(forecast) (forecast)* forecast converted from a nine-month accounting period

20 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022(

R

Technology Research Center	Collaborative Framework for Corporate Technology Management Groupand Business Divisions
The Corporate Technology Management Group works in close collaboration withthe business divisions through organizational units differentiated by function.

(％)
20

76.0

7.3

Business
Divisions

Development Strategy
Management Dept.

52Operating income (left)

ROIC (right)

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 21(％)
20

CORPORATE DATA

RenewableenergysystemsMove/transport

on

M
ec
ha
t

Targeted
Divisionsdevelopment areasof the SHI Group

Responding
to climatechangeser

Information
network
revolution

based oncutting edge
physics

Drive
solutionsEn

Evolution oftechnologies

Robotics
actuators

0

OUTCOME

Shift ofeconomic
powers

Improving
conveniencethrough applicationof cutting edge
technology

Ind
us
tri
al
Applications

Corporate Technology

Change indemographic
structure

Our product line

Management Group
ery
hin
ac
M

Climatechanges/Resource
scarcity

40.0

onment/energy
Envir

cs
ni
ro

50

SHI MATERIALITY(¥ billion)
80.0
60.0

Social issues to be solved

Improvingenergyefficiency

100

For new product development, we are promoting activities with close coordination between business divisions and Corporate Technology Management Group,
and we are implementing an integrated development
process that involves conducting basic technology
and elemental technology development in advance at
the Technology Research Center and the Production
Engineering Center and commercialization developOperating profit and ROIC (FY2022–2023, including forecasts)
ment in our business divisions.
65.7

Rapid
urbanization

150

Corporate Technology
Management GroupWe have identified social issues that would arise from megatrends that are expected over the medium to long term as
well as the development domains for products and technologies that are required to tackle these socials issues. These
considerations have informed the R&D activities that we are implementing based on a longer time horizon.

Improvinglabor
productivity

7

R&D Framework

Developing First-Class Products and Services That Tackle Social Issues

Megatrends

200

BUSINESS ACTIVITIES

Directions for strengthening our intellectual capital

202

A

(

CAPITALS

Message from the General Manager, Corporate Technology Management Group

Toshihiko Chijiiwa

R&D expenses(100 million yen)
200

(The Sources of Our Strengths)(Total R&D expenses under the previous MTMP overthree years: 56.5 billion yen)

SHI WAY

Total number ofpatents obtained:of labor, and promoting a circular economy.

In our MTMP2023, we have identified “environment &energy” and “automation & digitalization” as our prioriDevelopment
ty areas. We are also focusedon R&DStrategy
based on a longer
Management Dept.
time horizon by keeping a close eye on megatrends inIntellectual Property Dept.
the markets and our clients.
Business
Specifically,
weareaggressively
pursuing the R&D of
Divisions
Production Engineering Center
products and services aimed at building a sustainable
society and tackling thesocial issues
set out
in the SDGs.
Technology
ResearchCenter
In particular, the key issues identified for the entire
Group include improving energy efficiency and taking
action against climate change, addressing our aging
society and declining birthrate as well as the shortage
Corporate Technology
Management Group

68 billion yen

Total R&D expenses(MTMP2023) overthree years (planned):

Our R&D Strategy

15
10
5
0

*

The Sources of Our Strengths/

Financial Capital
Promoting ROIC Management

Our financial basis that serves as the foundation of a robust entity
Net Interest-Bearing
Debt Ratio

ROIC(Return on invested capital)

50.4%

2.1%

7.3%

(as of end of March 2022)(as of end of March 2022)(fiscal 2021)

Our Financial Position

Managing Executive Officer & General Manager of Corporate Finance, Accounting & Administration GroupR&D expenses(100 million yen)
R&D expenses
200(100 million yen)
200
150

Businessautonomously operate business units
that demonstrate strength
inProperty
their respective
DivisionsIntellectual
Dept.
Production Engineering Center
Businessmarkets. In order to further enhance our future growth potential, we believe that it isDivisions
Production
Engineering
now time to set a direction for the SHI Group as a whole
and re-establish
a Centerbusiness
Technology ResearchCenterportfolio that is desirable. My mission is to support this reform from a financial
Technology Research Center
perspective for our Group to achieve its ideal state.

150

100

100

50

50

0

0

202

200

2,500

2017

2018

2019

2020

2021

3,613

year) decisions.
2021are based
2017
2020
2022on(fiscal* Actual
figures2018
are based 2019
on P/L, while
projections
corporate(projected)

0

65.7
65.7

64.0

40.0

7.3

20.0
0
2017

7.3
2017

2018

2019

2018

2019

2020

Operating income (left)

(％)
20

64.0
76.0

7.0*

7.0*

22 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

ROIC (right)

(yen)
120
90

60

5

60

30

0

30

0

2021

0

2017

36.8*

36.8*32.0 90*

115

90

10

7.5

115

120

15

* forecast converted from a nine-month accounting period

Operating income (left)

15

(yen)
Dividends
and dividend payout ratio (including FY2022 forecast)

7.5
10

5
2023 (FY)2022(forecast) (forecast) 0(FY) accounting period2022 from 2023
*2021
forecast converted
a nine-month
ROIC(forecast)(right) (forecast)

2020

(％)
20

Dividends and dividend payout ratio (including FY2022 forecast)

32.0 90*

2017

2018

2018

2019

Dividends (left)
Dividends (left)

(%)
40

2020

2021

30

30

20

20

10

10
2022
2023 (FY)(forecast) (forecast) 0(FY) accounting period2020
2022 from 2023
*2021
forecast converted
a nine-month(forecast)(forecast)
Dividend payout
ratio (right)

2019

(%)
40

0

* forecast converted from a nine-month accounting period

Dividend payout ratio (right)

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 23

CORPORATE DATA

20.0

40.0

OUTCOME

76.0

80.0

40.0

3,613

0
35.0
Under our MTMP2023, we plan
to makein
our IT capabilities.
2017 ¥1172018billion
20192020 strengthening
2021 (FY)* Actual figures are based on P/L, while projections are based on corporate decisions.
capital investments in addition
to investing¥68
billion(left)
In addition,
we have raised our annual dividends to0
35.0
Total numberof patents
2017
2018
2019
2020
2021 (FY)(M&ANumberof overseas patents acquired)in
R&D
expensesand¥40billion
in
and
new
¥115
per
share
from ¥65 per share in the previous fiscal
capital investments, as well as the positive starts madeTotal number(left)
Ratioofofpatents
overseaspatents (right)
businesses
overathree-year
period.
Infiscal
2021,
the
year,
therebyincreasing
our dividend payout ratio to(
Number of overseas patents acquired)by Lafert and Invertek Drives, which we had acquired
first
year
of
the
MTMP,
capitalinvestment
was
¥45.6
32.0%
from
29.8%
in
fiscal2020. With regard to shareRatioof overseas patents(right)in Europe in 2018 and 2019. On the other hand, we
holderreturns,
MTMP2023
aims to deliver improved
billionand
R&D
expenseswere¥20.2
billion(onashould not be overconfident as profitability has lagged
profits and an incremental increase in dividend payout
cash-out basis). We expect machinery-related demandbehind in some areas relative to the growth in net sales.
ratio, with a target of 40% in fiscal 2023. Finally, we also
tocontinuegrowingmovingforward,
and
we
have
Moreover, issues related to supply chains have become
plan to incorporate an element of stable dividends whilerevisedourthree-year
cumulative
capitalinvestment
more apparent against the backdrop of COVID-19 andraising our return rate in our next MTMP.
upwardto¥117billioninorder
tofurther
expediteourheightened geopolitical risks in recent years, and efforts
investment,
with
a
focus
on
our
core
businesses
andto diversify risk have become more important than ever.

(¥ billion)
Operatingprofit and ROIC (FY2022–2023, including forecasts)

60.0

45.0

2022 (fiscal year)
Progressof 2,500
Our Investment Plans and Shareholder
Returns
40.0(projected)

In fiscal 2021, we received ¥1.0753 trillion in orders andgenerated net sales of ¥944 billion as well as an operating profit of ¥65.7 billion. With the recovery trend incapital investments, particularly in the manufacturingsector, net sales exceeded our target for fiscal 2021 andorders reached our target for fiscal 2023, the final yearof our MTMP.
However, these results could be attributed to abusiness environment that was better than expected,
which included a front-loaded rise in demand fromOperating profit and ROIC (FY2022–2023, including forecasts)(¥ billion)
80.0
60.0

3,792

5,000

SHI MATERIALITY

Our Business Results for Fiscal 2021

202

Acquisition of Patent Rights(Patents)(%)
stockholders’ equity
ratio has reached nearly 50% in reOur
stockholders’equityratio
at the end of fiscal 2021
200
Acquisition of Patent Rights
48.7
7,500
50.0
cent years,
which allows us to maintain a certain degree
was 50.4%, 2.8% higher
than that at the end of the last(Patents)(%)
7,405
48.7 of financial
fiscal year. Having experienced
sustained periods of
7,500
50.0 stability. Moving forward, we will focus on
7,405
growth-oriented
investments and shareholder returns.
financial hardship in the past, we have come to empha3,792
5,000
45.0
size not only profitability but also financial stability. Our

BUSINESS ACTIVITIESCorporate Technology
Management Group

Corporate Technology
Management Group

Development Strategy
Management Dept.
As a result of our efforts to consolidate our businesses while
reviewingStrategy
theDevelopment
Management
Intellectual
Property
profitability of individual businesses through ROIC management, we areDept.
now
ableDept.
to

CAPITALS

Supporting the transformation of the SHI Group to
its ideal state from a financial perspective(The Sources of Our Strengths)

Message from the General Manager of Corporate Finance, Accounting & Administration Group

Toshiro Watanabe

potential scope of our business activities to some extent. To address this issue, we have reorganized ourbusinesses into segments that are based on commonsocial issues in our new MTMP. We aim to offer better
solutions to our customers by eliminating the barriers
between different businesses and creating synergies,
while also expediting our growth in new domains
through efficient and aggressive investment. These
ideas will allow us to unlock the growth potential of ourbusinesses that has hitherto remained untapped.

For over 20 years, we have practiced ROIC-based management with an emphasis on business profitability. This
has allowed us to make progress in the consolidation of
our businesses and create a business portfolio that is
sufficiently profitable to achieve our ROIC target of 7.5%
in fiscal 2023 as set out in our MTMP.
However, we also recognize that as an unintended
consequence of our rigorous selection and concentration, each of our businesses has established secure
positions in relative niche areas, which has limited the

SHI WAY

Stockholders’Equity Ratio

The Sources of Our Strengths/

Human Capital

Number of
employees:

24,584

Number ofoverseas employees:(as of end of March 2022)

12,086(as of end of March 2022)

Kazutoshi Shiraishi

Executive Officer & General Manager of Human Resources GroupOur Human Resource Strategy

Expertise
education

OthersCoaching

New employee training

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 25

CORPORATE DATA

Specific technology education

WB

Business skills training

GB

OUTCOMEMBBBBSHI MATERIALITY

Training ofbusinessleaders

Quality Control Division managers mtg.

Basic engineering education

Intellectual property training for new employees

Expertise engineering
education (generallecture-based)Intellectual property management training

VE training

Basic sales training

Production engineer education

Expertise engineering
education (generalpractical-based)

Digital transformation literacy training

Expertise engineering
education (selectionbased)

CIPO training

Design Division managers mtg.

Development Division
managers mtg.

Manufacturing Division
managers mtg.

Service Division managers mtg.

Sales Division managers mtg.

Legal education in material procurement

Accounting new employee education

Practical education in material procurement

Introduction training

Purchasing Division managers
mtg.

Management Division
managers mtg.

3-year introduction education

Human resource training

Newly assigned 2nd
grade function training

Management quality

Each division

Accounting liaison committee meetings

24 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Newly assigned 1st grade
function training

Overseas dispatch (study abroad, etc.)

We will offer a fair and convincing evaluation system and process to boost employee motivation.

Newly assigned managerqualified training

Language education

Evaluation and Treatment

Global business training

Education before overseas assignment

We will respect employees’ will to develop themselves, and will also offer learning opportunities as well as
opportunities to put their learning into practice.

SBS

SHI Open College

Talent Development

Newly assigned line
manager training

Correspondence courses

We will assign the right people in the right places to maximize employee and organizational performance.

Knowledge/
skillsStratified education

Foremen training

Deployment

Trainingof Others
businessleaders

Specialized human resource development

Mid-career new employee training

We will recruit people who contribute to our business growth, resonating with Sumitomo’s Business
Philosophy and the SHI Group Business Principles.

Stratified human resource
development

Assessment
training
HR hearing/Group human resource mtg.

Recruitment

Transfer & development plan (development planning mtg. held for each business unit)

We will create an organization that respects the diverse personalities and potential of all individuals, andencourages good communication and open collaboration. We will create a workplace that is vibrant, andthat is safe, secure and healthy.

Members

Organizational Climate

Experience/
Allocation ofsubject

HR interview/Management by objectives (assignment)

Our Business Is the People. Based on the recognition that “one of the most important management resources is humanresources,” the Sumitomo Heavy Industries Group will realize human resource management that contributes to thesustainable growth of its business.

Activities in eachbusiness unit

Head Office-controlled activities

Succession plan

SHI Group Human Resource Policy

SHI Group Human Resource Training Systems

Executive officers/managers

fundamental to the sustainable growth of the Group, andwe are taking a proactive approach to promoting healthmanagement while striving to create a workplace where
safety is the top priority in all our business operations.
In our diversity promotion activities, we are focusing on
creating a workplace where diverse human resources canthrive through our various initiatives, including empowering women in the workplace, encouraging work-lifebalance, and fostering respect for LGBT individuals.

Hierarchical level

The management of human resources is a particularly
significant theme for our Group in order to accelerate
globalization and to continue providing first-class products and services that meet the needs of society. Basedon our ethos of “Our Business Is the People,” which runs
throughout the Sumitomo Group, we have established the
SHI Group Human Resource Policy and are promoting initiatives for employees to grow alongside the Company. In
addition, we believe that employee health management isTraining and education
As a Group in which employees of all ages and acrossthe professional spectrum play an active role, we provide opportunities for employees to acquire the necessary skills and knowledge through various level-specific

BUSINESS ACTIVITIESWe believe that promoting the active participation of a diverse workforce with different
values and experiences will lead to the birth of innovation and greater organizational
vitality. In addition to creating a safe and secure work environment, we have continued
to engage in efforts to set up an environment in which our employees can work
comfortably and feel motivated to work, as well as to strengthen interpersonalconnections and to develop an organization with even better organizational capabilities.

CAPITALS

We seek to set up an organizational structure and work environment that bring the best out of our diverse human resources

and specialized field-specific training programs while
utilizing on-the-job training based on target management as the basis for development. In the area of specialized technical training, we offer 80 courses in thefields of machinery and materials, electrical equipment
and electronics, control systems, software, information,and production technology, with a focus on hands-on
practical training courses. We also offer one-on-one
programs designed to nurture first-class engineers as
selection-based courses for the development of professional expertise. In the area of human resource development for digital transformation, we conduct digitaltransformation literacy training for all employees. In
fiscal 2021, we launched the “SHI Open College,” whichallows employees to selectively attend courses basedon their own job scope and career goals. Managerial
training is also conducted for management-level personnel to promote the development of their subordinates. In addition, we select candidates for leadershiproles from individual companies under our Group andoffer them intensive training over a period of one to two
years under the Sumitomo Heavy Industries Business
School (SBS) or the Management Course with the aim of
fostering the medium- to long-term development of ourmanagement personnel.

(The Sources of Our Strengths)

Message from the General Manager of Human Resources Group

Career development and our evaluation process
We aim to build a human resource management system
based on the SHI Group Human Resources Policy thatmaximizes the performance of both employees and theorganization through the appropriate allocation of human resources, and which allows for fair and convincing
evaluation and treatment of employees.
We use a target management sheet (assessment
sheet) to conduct interviews in which employees set annual goals with their superiors and discuss the achievement outcomes for these goals. This is then tied to
employee evaluation, with employees regularly provided with their evaluation results as feedback.
The assessment sheet also contains a space for employees to share their preferences on future careerdevelopment. We strive to nurture our employees intotalents by learning more about their intentions while
allocating and utilizing our human resources throughout
the organization in an appropriate manner.

SHI WAY

Global human resource management that supports
the sustainable growth of our businesses

Nurturing Talents

The Sources of Our Strengths/ Human Capital

Developing the Organization
divisions, divisions of the head office, as well as subsidiaries and affiliates, to promote activities centered on the
keywords of “dialogue” and “collaboration.”Childcare leave and shorter working hours for
employees with childcare needs
Employees may take childcare leave until the end of
March in the year their child reaches three years of age.
Flexible work arrangements, including shorter working
hours and fewer working days, are available until theirchild graduates from elementary school.
We are also actively working to encourage more male
employees to take childcare leave. The childcare leave
utilization ratio (including accrued leave) was 30% infiscal 2021, rising to 65% when including leave grantedby the company for their spouse’s childbirth or for otherchildcare-related reasons.

SHIesta and an example of its lunch menu

26 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Roadmap

Targets

2016- Awareness change phase/Behavioral change phase• Understanding the importanceof diversity through study
sessions and training held for
management• Holding workshops for female
employees• Raising awareness throughthe company intranet and SHI
group magazines• Expanding work-life balance
support systems

1 Increase the number of newly
employed women
Ratio of women among new graduate
hires: Above 20%

2020- Behavioral change phase• Strengthening the commitment of
top management• Launching working groups foreach business site
• Female manager training program• Promoting work style reforms• Starting organizational development activities• Promoting empowerment ofdiverse personal in the workplace,such as senior and global personal• Promoting understanding of LGBT
people• Empowerment of disabled people
in the workplace• Continuous awareness-raising
activities for employees

Expansion

2024- phase

Creating an organization where diverse
human resourcesplay an active role2 Actively promote women to
management positions
Double the number of female
managers by April 1, 2023
(from 12 (1.4%) in April 2015 to 24)
3 Reduce long work hours
Total annual working hours to beachieved by FY2022: 1,900s

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 27

CORPORATE DATA

Promoting the use of paid vacations and accrued leave
Employees are granted 22 paid vacation days each year.
Any paid vacation days not used during their validity

Flexible work hours and teleworking
We aim to help employees achieve work-life balanceand enhance their productivity by promoting flexible
and autonomous workstyles that allow them to work
anytime, anywhere.

LGBT initiatives
 e have invited external speakers to deliver lectures to ourWGroup’s HR personnel to deepen their understanding ofLGBT issues.
We disseminate informational articles as part of our company
newsletter and email newsletter to promote understandingof LGBT issues among all employees.
We have created LGBT ALLY stickers and distributed them to
employees who support this cause.

OUTCOME

Designation of “no overtime” days
Each business site has designated a “no overtime” dayonce a week to encourage employees to leave the officeon time through on-site announcements and patrols.

Establishment of multipurpose spaces andcanteen buildings
In order to provide employees with a variety of workspaces and recreational spaces, we have establishedmultipurpose spaces and other facilities at various locations. A new canteen building was opened at Nagoya
Works in July 2021.
The building was named “SHIesta,” a portmanteau
that combines the Spanish word “siesta” (afternoonrest) with the abbreviation of our Group’s name SHI, in
the hope that it can serve as a more comfortable site for
employees to relax.
SHIesta offers a wide variety of lunch menus, including those designed for non-Japanese employees, tosupport the health of
employees throughtheir diet.

Implementing e-learning on the subject of “subconsciousbias” for all managers in our GroupConducting diversity management training for managers andas part of level-specific trainingDispatching employees to J-win, an NPO, as part of ourefforts to strengthen the development of female managers
Supporting career development by having the HR department conduct one-on-one interviews with women prior totheir promotion to management positions as well as theirsuperiors and creating development plansEfforts to ensure the stable employment of disabled individuals
 leaning and greening teams (Yokosuka Works)
C
These teams are responsible for cleaning areas and maintaining the greenery around manufacturing sites.
SHI Iki-Iki Farm
Vegetables cultivated at our farm are harvested and sold to employees at sales events. All proceeds are donated to non-profit
organizations that support the development of children.

SHI MATERIALITY

Workstyle reforms
We believe that achieving work-life balance is importantfor each and every employee to make the most of theirunique traits and capabilities. We are promoting thedevelopment and implementation of various systems
that support efficient workstyles as well as the childcare
and nursing care needs of employees.

period can be used for purposes such as fertility treatment, childcare, nursing care, volunteer activities, etc.,
in the form of accrued leave.

Support for foreign employees working in Japan ersonalized support for daily needs
PJapanese language education
Religion-related provisions

BUSINESS ACTIVITIESAs an organization that operates globally, the SHI Group
strives to provide appropriate work conditions and environments in addition to complying with the laws andregulations of each country, including those concerning
working hours and wages. In addition, our Compliance
Manual, which outlines specific action guidelines that include various rules to be observed by group employees,
also contains sections on “Respect for Human Rights,”“Prohibition of Unfair Discrimination,” “Prohibitionof Harassment,” and “Appropriate Management ofWorking Hours,” reflecting our commitment to create abetter work environment. In addition, we have also entered into collective agreements with labor unions andhave engaged in a series of dialogues between laborand management on matters such as safety and health,working conditions, and business conditions.

Promoting career development for women
As our Group has a high proportion of male employees,
promoting the active participation of women is key toour medium- to long-term growth. Therefore, we havespecified this as one of our KPIs in management andlaunched various initiatives on this front. We achieved
our target of doubling the number of female managers (from 12 (1.4%) to 24 (2.7%)) in April 2022, one year
ahead of schedule, and we will continue to focus on the
career development of women.

Creating an environment where our diverse
employees can play an active role
The SHI Group strives to create a work environment
where our diverse employees can make the most of
their individual traits and attributes and play an activerole. Along with the globalization of our business, weare actively recruiting talents of different nationalities.
We have set up a support system to ensure that our foreign employees can work with peace of mind even after
leaving their home countries.

CAPITALS

Making Work Easier onducting seminars to support employees returning toCwork after childcare leave and conducting interviews with
their superiors about returning to work

(The Sources of Our Strengths)

Engaging in dialogue as part of PRIDE PJ

The Diversity Promotion Declaration
The SHI Group considers diversity to be an indispensable foundation for its growth. We respect the differences in the traits and attributes of each person (e.g.,age, nationality, birthplace, gender, gender identity,
sexual orientation, presence of disabilities, etc.), andwe strive to foster an organizational culture that allows
every individual to reach their maximum potential.
The “SHI Group Diversity Promotion Declaration”
was issued in 2016 by the President & CEO, our Group’s
top management, and we have continued to promote
initiatives centered on the three pillars of “raising awareness,” “revising existing systems,” and “improving theenvironment” set out in the Declaration.

SHI WAY

In order for the SHI Group to achieve sustainable growth
based on our medium- to long-term management strategy, we believe that in addition to the details of the strategy, it is vital to have individuals and the organization
take on the challenge of boldly tackling various issues
and overcoming difficulties with their colleagues, even
if they occasionally fail. We have launched a group-wideorganizational development initiative known as PRIDEPJ (Pride Project) to promote the cultivation of a corporate culture in which employees within the organization
think and act on their own initiative to achieve growthand improvement for the organization. Since fiscal 2020,
secretariats have been set up in a total of 38 operating

Promoting Diversity

The Sources of Our Strengths/ Human Capital

Health Promotion Among Employees*1 This system recognizes corporations that practice particularly
outstanding health management based on their efforts toaddress local health issues andengage in health promotion
advocated by the Nippon
Kenko Kaigi.

(as of end of March 2022)

Confidence in the “Sumitomo” Brand
Sumitomo’s foray into its businesses of copper refining,copper trading, and copper mining began with the
opening of the Besshi Copper Mine in Shikoku, which
is one of the four main islands in Japan, in 1691. Thiswas followed by the establishment of the SHI Group in1888 to handle the mechanical operations at the Besshi
Copper Mine by manufacturing and repairing the machinery and equipment used at the mine. As a company
deeply rooted in the Sumitomo family, our Group has
worked to create a better society for over 130 years
in line with the Sumitomo Business Philosophy by embracing our mission to ensure that our business must

Sumitomo’s business activities over the last 400 years are
symbolized by the Sumitomo trademark (the Sumitomo
igeta motif). This Sumitomo igeta motif is also featured
in our company logo, a sign of the confidence we haveearned as a member of Sumitomo Group.

The SHI Group Basic Safety and Health Philosophy
The SHI Group strives to create pleasant workplaces
where all employees can work in healthy, safe, andsecure environments based on a spirit of respect forhuman beings. With this mind, we act on the basis ofa “safety first” policy through collaboration between
labor and management.

 xpanding the acquisition of ISO 45001 certification
E
In order to improve our occupational safety and health management system, we are promoting the acquisition of ISO 45001 certification at various sites. Around 50% of our major manufacturing
sites in Japan have successfully obtained this certification.

The SHI Group has established around 150 bases across the world, including in Japan, the rest of Asia, Europe, theMiddle East, North America, and South America. Our various bases work together to develop our business globally.

Japan

41 bases

Europe and the Middle East

North America

38 bases

18 basesAsia

42 bases
Net Sales Ratio by Region (FY2021)

and response processes to prevent the transmission of COVID-19 as well as to monitor the numberof cases within our Group. In addition, we are also
focused on promoting the implementation of ourbusiness continuity plans so that we can continue tocontribute to society through our core businesses.

Latin America

Japan ¥423.9 billion / 44.9%

North America¥159.6 billion / 16.9%

Oceania

1 baseOverseas55.1%¥520.0 billion

Others¥50.8 billion / 5.4%

11 bases

Europe¥108.1 billion / 11.5%
Asia (excluding China)¥95.5 billion / 10.1%

China¥106.0 billion / 11.2%

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 29

CORPORATE DATA

28 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

not only benefit Sumitomo but also the nation and thesociety at large.

A Network that Extends Across the World

Measures against COVID-19
We believe that it is our responsibility as a company
to ensure the safety and health of our employees,
their families, and all affiliated personnel and to
make every effort to prevent the transmission of
COVID-19 in the workplace. To this end, we have established a “COVID-19 Response Committee” at our
Head Office to formulate group-wide policies, plans,(as of end of March 2022)

OUTCOME

Creating a safe and secure workplace
With manufacturing sites based around the world, the
SHI Group has adopted the “SHI Group Basic Safety and
Health Philosophy” as its policy on occupational safety
and health and strives to ensure the safety and healthof all employees, internal and external contractors, andother affiliated personnel. Given the importance of ensuring occupational safety and health for both employees and the company, we have established the Central
Committee on Safety and Health, chaired by the Officer
in charge of Human Resources Group, to discuss basic
policies and relevant measures on a regular basis as partof our efforts to promote occupational safety and healthin collaboration with labor unions.

7,481 companies 151 bases

SHI MATERIALITY

Making Safety Our Top Priority

Our global network

BUSINESS ACTIVITIESOur Company has been recognized as a “CertifiedHealth & Productivity Management Outstanding
Organization 2022 (large enterprise category)”*1
jointly selected by the Ministry of Economy, Tradeand Industry and the Nippon Kenko Kaigi.

Number of suppliers

CAPITALSPromotion of data-based health and collaborative healthIn collaboration with the Health Insurance Society of Sumitomo
Heavy Industries, we have formulated a plan to create a healthy
workplace based on existing data pertaining to the results of regular health checkups and treatment status, and we are steadily
promoting health support measures for all SHI Group employees
based on this plan.
Promotion of mental health measures
In addition to implementing regular stress check tests, mental

The “Sumitomo” Brand and Our Global Network
health training is also conducted at each business location basedon the results of these tests by both our internal occupational
health staff and through external employee support programs.
Measures to combat cardiovascular diseases
To minimize work-related challenges faced by employees due tocerebrovascular disorders and myocardial infarctions, we actively
adopt measures aimed at preventing the onset of such diseases,
such as anti-smoking campaigns and walking events, as well as
provide health-related guidance and consultation recommendations based on the results of health checkups.
Measures to combat COVID-19 and other infectious diseases
We provide employees traveling overseas with the latest information on COVID-19 and actively raise awareness and draw their attention to malaria, HIV, tuberculosis, and other global health risks.

(The Sources of Our Strengths)

The SHI Group Health Declaration
Based on “Respect People” as stated in our management philosophy, the SHI Group will proactively
maintain and promote the health of workers anddevelop an environment where everyone lives withgood mental and physical health.

Social Capital

SHI WAY

Promoting health management
For a company to continue growing sustainably, it isimperative to establish a work environment and healthmanagement system that allow each and every employee
to keep themselves healthy both physically and mentallyso that they can continue to work with vitality. We have established the “SHI Group Health Declaration” to promotevarious initiatives aimed at supporting good health, with
the President serving as the Health Management Officer.

The Sources of Our Strengths/

The Sources of Our Strengths/ Social Capital

The Sources of Our Strengths/

Natural Capital

Our Initiatives to Reduce Environmental Impact

Responsible Procurementtransactions, we seek to promote responsible procurement along with our business partners in the spirit ofrespect for human rights, compliance, and environmental conservation.

Energy consumption

Renewable energy consumption

522.9

1,298 MWh 1,554

thousand MWh

Percentage of responding
companies to total numberof Tier 1 suppliers

5.5%

Summary of Survey Results

We identified strengthening our efforts in thefollowing areas as particularly important tasks.
- Effective use of environment and energy- Safety of production facilities- Corruption and bribery- Waste reduction

The SHI Group believes that addressing global environmental issues, including climate change, is one of
its responsibilities as a company engaged in businessactivities on a global scale. As our business is foundedon the provision of industrial machinery to support
our customers’ production activities, we believe that
improving the environmental performance of our products and services will contribute to the realization of adecarbonized society and enhance the competitiveness of our products. In view of this, we are working
to reduce our environmental impact in line with theSumitomo Heavy Industries Group Environmental Policy
through a two-pronged approach of reducing the environmental burden of our business activities and improving the environmental efficiency of our products.

Sumitomo Heavy Industries Group Environmental Policy
Under a management system headed by the President& CEO as the chief officer, our Environmental Policy wasrevised in December 2021 with the aim of expediting
our efforts aimed at addressing climate change. The

policy now contains more specific details on the basic
initiatives that should be undertaken by our Group andseeks to further strengthen environmental management
throughout the entire Group.

SHI MATERIALITY

We conduct a questionnaire survey on thestatus of sustainability approaches to ourmajor suppliers to assess ESG risks in the
supply chain. After gathering their responses, we send them written requests for improvement that outline the areas in which
improvement can be achieved.

409 companies• Enhancement of environmental risk management• Reduction of CO2 emissions with actions addressing climate changetaken into consideration• Reduction of environmental loads in business activities• Preservation of biodiversity

BUSINESS ACTIVITIES

Number of responding
companies(FY2021)(fiscal 2021)

CAPITALS

Supplier Survey and Summary of Results

4 Improvement of product competitiveness andcustomer satisfaction
5 Consideration for the environment
6 Information disclosure to promote communication
with stakeholders

Key Environmental
Priorities(fiscal 2021)(The Sources of Our Strengths)

The SHI Group aims to provide products and services that contribute to economic and technological development towardsustainable society. In order to achieve this goal, we have established the CSR Procurement Guidelines. The cooperationof our business partners is essential to these efforts. We ask our business partners for their understanding and cooperation in promoting each item of the guidelines.

1 Human rights, labor practice, Occupational Healthand safety
2 Open and fair competition and trade practices
3 Compliance with laws, regulations, and social ethics

thousand m3(fiscal 2021)

CSR Procurement Guidelines (Overview)

Water consumption

SHI WAYAs a global business enterprise, the SHI Group is committed to mitigating ESG risks throughout its supply
chain and to building mutually beneficial and robust
relationships with its business partners.
In addition to ensuring fair, equitable, and transparent

Stakeholder Engagement
we also strive to foster greater understanding andconfidence in our company through appropriate information disclosure.

Major stakeholders and engagement approaches
Customers

2. The SHI Group will strive to reduce environmental impacts through efforts such as reducing carbon dioxide emissions and waste, reusing and recycling resources, and using energy more efficiently, and work toward achieving adecarbonized and circular society.
3. The SHI Group will work to address impacts of its operations on nature and ecosystems and conserve biodiversity.

Shareholders andinvestors

Business partners

Employees

We are committed tomaintaining and improving
market confidence in ourcompany through general
meetings of shareholders,IR activities, and timely
disclosure.

We make every effort tobuild robust relationships
with our business partners
through information sessions and CSR surveys, inaddition to our day-to-day
interactions.

We promote communication with employees
through our company
newsletter, Intranet,
employee attitude surveys,
labor union engagements,and our Ethics Hotline.

30 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

1. The SHI Group will work to conserve the global environment and endeavor to prevent environmental pollution.

Local communities andNGOs/NPOs
We aim to promote
greater understandingof our company throughour advertising activities
and the dissemination of
information and to understand existing social issues
by participating in social
contribution activities.

4. The SHI Group will strengthen its environmental management structure and continue to operate and improve its
environmental management system.
5. The SHI Group will not only comply with environmental laws and regulations but will also establish and apply voluntary standards to assess its environmental performance as needed.
6. The SHI Group will work to raise environmental awareness of everyone involved in its operations through continuous environmental education and awareness programs.
7. The SHI Group will share with and communicate and disclose to all stakeholders this Environmental Policy.

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 31

CORPORATE DATA

We strive to keep abreastof the needs of ourcustomers through our
day-to-day sales activities
and customer satisfaction
surveys.

Sumitomo Heavy Industries Group Environmental Policy
OUTCOMEThe SHI Group places great emphasis on maintaining
communication with all relevant stakeholders. In addition to incorporating the views of society into our management through ongoing dialogue with stakeholders,

The Sources of Our Strengths/ Natural Capital

Environmental Management System
Executive & Operating Officers Committee(3 times a year)

President and CEO
Officer in Charge,
General Administration Group

Japan and China Environmental
Management Conference (twice a year)
Environment and Energy Conservation
Conference for Prevention of
Global Warming (each area)

Index

Environmental
management

Environmental Audit Team

DivisionsGroup companies

Environmental
Committee members

Environmental
Committee members

Environmental
Committee members

Response to
climate change

Acquisition of ISO 14001 Certification
facilities to receive unified certification, bringing thetotal number of certified sites to 50. In addition, alldomestic Group subsidiaries and affiliates not includedin the unified organization have acquired certificationindividually. Overseas, our major manufacturing plants
began acquiring certification in 1998, and as of fiscal
2021, 21 sites have acquired certification. (Percentage ofthe entire group certified: 79.4%)

Resource
conservation /recycling

FY2021 Target

FY2021 Results

Number of serious environmental accidents

—

Zero

0

Number of environmental accidents—

3 or less5

Total CO2 emissions (Japan)

2019

2% reduction compared to FY2019

3.5% reduction

During production / energy productivity (Japan)

2019

2% improvement compared to FY2019

2.8% improvement

During production / energy productivity (overseas)

2019

2% improvement compared to FY2019

4.1% improvement

During transportation / green logistics (Japan)

2019

Maintain FY2019 level

0.9% decrease

Expansion of the range of Sustainability Plus Products(Environmentally friendly products)

2020

23 models

25

Reduction of waste generated (basic unit) (Japan)*

2017–2019

Maintain FY2017–FY2019 average

11.8% reduction

Reduction of waste generated (basic unit) (overseas)*

2019

2% reduction compared to FY2019

5.1% reduction

Zero emissions landfill rate (Japan)—

Less than 0.5%

0.1%

Reduction of product packaging materials (basic unit)

2017–2019

Maintain FY2017–FY2019 average

2.8% reduction

Reduction of water consumption (Japan)

2017–2019

Maintain FY2017–FY2019 average

1.5% reduction

2019

Maintain FY2019 level

8.6% reduction

Reduction of water consumption (basic unit) (overseas)
Prevention ofenvironmental
pollution

VOC reduction volume (Japan)—Total

2019

Maintain FY2019 level

12.2% reduction

VOC reduction volume (Japan)—Basic unit

2019

Maintain FY2019 level

16.9% reduction

FY2021
Evaluation

SHI MATERIALITYThe SHI Group has been working to obtain certification
at each of its manufacturing facilities in Japan since1998. In 2018, the SHI Group obtained unified certification in order to unify environmental management
operation rules at six manufacturing facilities and sevenplants and to improve the efficiency of maintaining
certification. In the fiscal 2021 audit, Sumitomo Heavy
Industries Gearbox Co., Ltd. under our Group became
the first production site other than our manufacturing

Base year

BUSINESS ACTIVITIES

Works

Item

CAPITALS

Environmental Management
Group

Environmental Audit (once a year)(The Sources of Our Strengths)

General Manager,
General Administration Group

Assessment by general manager(once a year as necessary)

addressing climate change taken into consideration, (3)reduction of environmental loads in business activities,and (4) preservation of biodiversity. In addition, we have
set targets for each of these initiatives through fiscal
2023, and we will monitor the progress we have madeeach fiscal year.

We have formulated the 6th Medium-Term Environmental
Plan (FY2020-FY2023) as a medium-term plan for environmental management and are currently implementing the initiatives in the plan. The plan sets forth fourmaterial issues: (1) enhancement of environmental risk
management, (2) reduction of CO2 emissions with actions

SHI WAY

Under the Sumitomo Heavy Industries Group
Environmental Policy, the officer in charge of generalaffairs oversees the various initiatives. The divisions of
our Head Office conduct environmental management
audits once a year at our manufacturing sites, including
those of our subsidiaries and affiliates, to maintain andimprove the standards of environmental management
throughout the Group. Audit results are reported atenvironmental management meetings attended by
key personnel of our Group involved in environmental
management, with any outstanding issues shared widely
within the Group for the purpose of improvement. We
also conduct environmental education as part of ourefforts to disseminate and raise awareness about ourpolicies, key priorities, and the necessary initiatives
among our employees.

The 6th Medium-Term Environmental Plan

* Including Harmful Waste Disposed

Our Long-Term Target: Aiming to Achieve Carbon Neutrality by 2050
Acquisition of Third-Party Certification of Environmental Data

Scope of certification:	28 domestic sites of the SHI Group(13 manufacturing sites and 15 offices)
Data covered:	Energy usage (crude oil equivalent) in fiscal 2020 *1
CO2 emissions from energy use in fiscal 2020 *2

32 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Capital Investment in Environmental and Energy-Saving Equipment
We have made ¥2.51 billion in capital investment inenvironmental and energy-saving equipment in Japanand overseas. We are taking a proactive approach toupgrading aged equipment and installing equipmentwith the latest technologies from the standpoint of
increasing efficiency, conserving energy, and preventing
environmental accidents.

(unit: million yen)Amount ofcapital investment

FY2018FY2019FY2020

FY2021

Environment-related

416

826

573

547

Energy conservationrelated

2,057

3,706

1,287

1,967

Total

2,473

4,532

1,860

2,513

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 33

CORPORATE DATA

*1 Energy usage (crude oil equivalent): Electricity, city gas, LPG, heavy fuel oil A, gasoline, light oil, kerosene, hotwater, cold water*2 CO2 emissions from energy use: CO2 emissions from energy used by the Company*1• Achieve carbon neutrality (net-zero CO2 emissions) acrossthe entire SHI Group by 2050
• CO2 emissions from product manufacturing (Scopes 1 & 2):
50% reduction by 2030 (from fiscal 2019)• CO2 emissions from product use (Scope 3, Category 11):30% reduction by 2030 (from fiscal 2019)OUTCOMETo enhance the reliability of its environmental impact data, the SHI Group has
obtained third-party certification from Bureau Veritas Japan Co., Ltd. for environmental impact data associated with its business activities.

In May 2022, the Board of Directors passed a resolution
to achieve carbon neutrality across the entire SHI Groupby 2050. To meet this goal, we are working to achieve
the CO2 emissions reduction targets that we have set
through 2030.

The Sources of Our Strengths/ Natural Capital

Contributing to the Environment Through Our Business
Sustainability Plus Products(Environmentally friendly products)
Since 2011, the SHI Group has implemented an internal
certification system for environment-conscious products
based on its proprietary evaluation method with thegoal of developing products that are more environmentally conscious. From fiscal 2021, we have incorporated new elements that include social aspects into ourassessment criteria items and renamed the products to“Sustainability Plus Products.” Through these efforts,
we aim to further improve the products’ competitiveness and environmental performance (resource recycling, global warming countermeasures, environmental
risk management), while also publicizing the initiative
to the outside world as part of our Group’s efforts topromote CSV activities.

Assessment criteria items
1. Resource-saving
2. Improvement of recycling at the time of disposal(facilitate sorting and treatment)
Environment

Resource recycling

Environmental
risk

8. Environmental sustainability

Other

9. Life cycle assessment (LCA)

Environment

3. Making long-life products
4. Packaging/packing

10. Safety

5. Provision of information
6. Resource-saving measures when in use
Combats global
warming

Society—

BUSINESSACTIVITIESThe SHI Group provides society with a variety of products and services, including industrial machinery that supports the production activities of clients and equipment that supports our social infrastructure. Engaged in businesses as diverse as these, the SHI Group
conducts its business activities in four key segments that have been categorized and structured from the standpoint of social issues. We pursue the synergies within each segmentto achieve new growth while aiming to enhance both social value and economic value
through our business activities.

11. Labor-saving

7. Energy-saving measures when in use

Overview of Our Sustainability Plus Products

Hydraulic excavators
Hydraulic excavators are construction machinery that operates by converting the engine output
of diesel engines into hydraulic pressure. The improved fuel efficiency of our hydraulic excavators
takes environmental burden into consideration and contributes to reduced CO2 emissions throughtheir usage. In fiscal 2019, our hydraulic excavators received the Japan Machinery Federation
Chairman’s Award for Energy-Efficient Equipment/Systems, which attests to their superior fuel efficiency and has spurred us to continue developing and supplying highly fuel-efficient and operable
machinery to the global market. These excavators have also been registered as Super Sustainable
Products, which are among the most highly-rated sustainable products.

Circulating fluidized bed (CFB) boilers
Circulating fluidized bed (CFB) boilers are unique for their ability to burn a wide range of nonfossil fuels, including forest thinnings and other forms of unused wood, biomass fuels derived
from palm kernel shells, palm residues, and construction waste materials, as well as refusedderived fuel (RDF), in an efficient and stable manner, thus playing an important role in the stablesupply of carbon-neutral energy. The diversity of fuels that can be used with CFB boilers allows
them to contribute to the elimination of fossil fuels and the reduction of CO2 emissions while
making use of biomass and waste materials generated locally.

CAPITALS

Biodiversity is an important foundation for individuals to lead vibranteveryday lives and for corporate activities, and we believe that it mustbe passed on to future generations in an appropriate manner. To thisend, we have been engaged in our business activities with due consideration to their impact on our ecosystems in line with the Sumitomo Heavy
Industries Group Environmental Policy. We launched a partnership withOISCA in fiscal 2017, and since 2020, we have been participating in the
Mt. Fuji Forest Development Project, which aims to restore artificial forests on Mt. Fuji that had suffered from insect damage and transform theminto robust and diverse forests again.

34 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

BUSINESSACTIVITIES(The Sources of
Our Strengths)

Manufacturing
CapitalIntellectual
CapitalFinancial
CapitalHuman
CapitalOur Initiatives for the Preservation of Biodiversity

STRENGTH
Advanced
technologicalcapabilities andcollective strengths
that contribute to
the sustainable
development ofsociety

Superior
management
capabilities thatcreate social
value andcorporate value

SocialCapitalNaturalCapitalA corporate
culture ofalwaysembracing newchallenges

Mechatronics

OUTPUTSHI
MATERIALITY
Priority issues
for value creation
Reduceenvironmental
burdenCreatebetterways to live
and work

Industrial
Machinery

Logistics&
Construction

Energy&Lifelines

OUTCOME

Optimization of
products toconserve energy
and resources

Ensurehighproduct
quality
Prioritize
employee safety,
health, anddevelopment

Automation of
products tosave manpower

Contribute toaction against
climate change andthe creation of arecycling-oriented
societyEnhance laborproductivity
and safety
for clients

Creationof sharedvalue

Emphasize
coexistence
and co-prosperity
with local
communities

Applicationof advanced
technologies(beam control,
cryogenics, vacuum
technology,etc.)Strengthen
governance

Enhance
information
disclosure

Foster well-being
and improve
quality of life

Priority issues for strengthening
our business foundation

Participating in the Mt. Fuji Forest Development
Project (July 2022)

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 35

The 4 Segments of SHI

FY2021 Net Sales Ratio

Mechatronics¥944.0Industrial Machinery¥230.6 billion / 24.4%

Industrial Machinery¥19.3 billion / 29.4%

Logistics & Construction¥341.4 billion / 36.2%

billionIndustrial Machinery

Mechatronics¥6.4 billion / 9.7%

¥65.7

Logistics & Construction¥19.3 billion / 29.4%

billionEnergy & Lifelines¥205.1 billion / 21.7%

Energy & Lifelines¥18.2 billion / 27.7%

Others
¥6.0 billion / 0.6%

Others¥2.4 billion / 3.7%

Logistics & Construction

Energy & Lifelines

Net Sales

Operating Profit

Net Sales

Operating Profit

Net Sales

Operating Profit¥161.0 billion¥6.4 billion¥230.6 billion¥19.3 billion¥341.4 billion¥19.3 billion¥205.1 billion¥18.2 billion

R&D Expenses

Capital Investment

R&D Expenses

Capital Investment

R&D Expenses

Capital Investment

R&D Expenses

Capital Investment¥13.5 billion

Key Businesses

Power transmission business, Precision machinery &control equipment, Industrial control systems business

Main Products¥14.7 billion¥5.2 billion

Key Businesses

Plastics machinery business, Cryogenic equipment business,
Semiconductor production equipment business, Medical equipment
business, Industrial equipment & forging presses business,
Industrial machinery/dust collectors/precision air conditioning business,
Precision grinders & coolant equipment business

Main Products¥13.6 billion¥1.9 billion

Key Businesses

Key Businesses

Main Products

Main Products

Hydraulic excavators business, Mobile cranes business,
Material handling systems businessHydraulic excavators, Road machinery, Mobile cranes,
Material handling systems, Logistic systems¥3.4 billion

Energy plants business, Water treatment plants business,
Turbines & pumps business, Ships business

Energy and environmental equipment, Water treatment systems,
Turbines, pumps, pressure vessels, chemical instruments,
Food processing machinery, Ships

Plastics machinery (injection molding machines), Cryogenic equipment,
Precision parts, Semiconductor production equipment, Medical/
advanced/cyclotron equipment, Forging presses, Industrial/environmental
equipment, Precision grinding machine, Defense equipment

Environ- • Developing high-efficiency motors
ment

Environment• Reducing energy consumption throughelectrification of injection molding machines

Environment• Reducing CO2 emissions during use throughICT and electrification•R educing CO2 emissions during use byimproving energy-saving capabilities• Reducing resource consumption throughhigh-precision molding• S trengthening resilience and revitalizing the
economy through locally distributed power sources• Developing cryogenic,
superconducting, andcyclotron applications

Cryocoolers
Hydraulic Excavators• Improving labor productivity throughrobotics technology

SocietySociety• Cancer diagnosis
and treatment

Biomass Power Plant

OthersRemote-controlled RTG• I mproving labor productivity throughsmart logistics

Ultralight Hybrid Reducer

36 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

• Responding to infrastructure upgrades

BNCT

High-density AutomatedWarehouses

Net Sales

Operating Profit¥6.0 billion¥2.1 billion

Main Products

Real estate, Software

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 37

CORPORATE DATA• Making society
IT-oriented throughsemiconductor
production support Semiconductor Production Equipment

Crawler Cranes
OUTCOME• Supporting power
semiconductor
production

Inverters manufactured by
Invertek Drives

SHI MATERIALITY• I mproving efficiency and supporting operatorswith plant management support systems

Injection Molding
Machine• Expanding our lineup of inverter controls

ECYCLO® High-Precision Gear Reducer
ECY Series• Reducing CO2 emissions via fuel conversion ofcoal-fired boilers and the use of non-fossil fuelpower plants• C reating main renewable energy power sources
through large-capacity energy storage facilitiesCYCLO®DRIVE

Society

Environment

BUSINESS ACTIVITIESPower transmission & control equipment, Motors, Inverters,
Precision positioning equipment¥10.6 billion

CAPITALS

Operating Profit(The Sources of Our Strengths)

Net Sales¥2.5 billion

SHI WAYSHI has determined that in order to achieve both sustainable growth as well as the expansion of social value, it is imperative for us to strengthen our exploratory capabilities, achieve a certain scale of operations, and further refine our
exploitation capabilities through the power of integration. In view of this, we have conducted a review of the segmentsthat we have focused on since fiscal 2021.
The following are our leading products in the respective segments and how they contribute to society and the environment. The following pages provide an overview of each of our businesses and our business strategies.
(The figures in the tables are taken from our business results for fiscal 2021.)

FY2021 Operating Profit Ratio

Mechatronics¥161.0 billion / 17.1%

Business
Overview

Mechatronics
Looking back on fiscal 2021

Value we aim to provide• Elimination of labor shortages through automation and labor savings• Reduction of CO2 emissions through energy conservation

Outlook for fiscal 2022/Future plans (directions and new initiatives)

Net Sales Ratio by Region (FY2021)

Orders¥194.5 billion

Others 9.7(6.0%)Net Sales¥161.0 billion

Europe 35.0
(21.7%)¥6.4 billion(¥ billion)

Japan 58.3
(36.2%)

Total 161.0
China 15.9
(9.9%)

North America 27.6
(17.1%)

Due to a change in our accounting period from fiscal 2022, fiscal 2022 will be a nine-month accounting period from
April 2022 to December 2022. The figures for fiscal 2022 presented in pages 38 to 45 are reference values that assume a twelve-month accounting period for fiscal 2022 in Japan.
Both net sales and operating profit are expected to riseyear on year due to the large number of backorders
following the high volume of orders in fiscal 2021. The
order environment is also expected to remain at thesame level as the previous year.
In addition to the demand for automation that continues to fuel capital investments, we also aim to capture
new demands for manpower reduction, higher efficiency, and electrification, while expediting our growth in
the areas of electric motor control systems and highprecision gearboxes. We have identified “logistics,”“robotics,” “food,” and “environment and energy” as
our key areas of focus, and we will strive to expand ourmarket share across a wide range of industries.

At the same time, as an installed-base business, weseek to improve our ability to propose new solutions to
end users in addition to the services we currently offer.
The impact of supply chain disruptions on parts procurement and product transportation is expected topersist through fiscal 2022. We will build a global supply network that is resilient to change and adversity byreviewing and strengthening our parts procurement
network. In addition, we aim to carry on our efforts inthe previous year to further enhance our clients’ faithin our product quality through quality improvement
operations on the production line and leveraging IoT
in inspections.

Orders(¥ billion)

200.0

Operating Profit/Operating Profit Ratio

Net Sales(¥ billion)

194.5 193.0 196.0(¥ billion)

195.0 198.0

200.0

15.0

Operating Profit (left)

Operating Profit Ratio (right) (%)
12

161.0
150.0

11.0

150.0

6.4
5.0

50.0

0

50.0

2017 2018 2019 2020 2021 2022 2023
forecast target

(FY)

0

2017 2018 2019 2020 2021 2022 2023
forecast target

38 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

(FY)

0

New
initiatives• Develop actuators for service and support robots• Market launch of drive unit products that combine gear reducers with electronic and control devices• Provide maintenance solutions using condition monitoring systems

8

5.6 5.7

4.0

2017 2018 2019 2020 2021 2022 2023 (FY)
forecast target

40

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 39

CORPORATE DATA

100.0

• Achieve growth of drive unit business through combination of component products• Launch drive solution business including robotics elements• Expand service business

12.0

10.0
100.0

Directions

OUTCOME

Asia 14.5(9.0%)SHI MATERIALITY(FY2021)

to address the issues faced by society and our clients by
optimizing the movement of goods. We are also expanding our business globally through our many manufacturing and sales bases in Japan and overseas.
In the areas of precision machinery/control devices
and industrial control systems, we are developing ourbusiness with a focus on laser annealing systems andprecision positioning equipment that harness our laser
control and processing technologies.

BUSINESS ACTIVITIESGear reducers are power transmission devices that
reduce the number of revolutions in motors to generate
greater power. Such devices are used in a wide range ofsettings to drive equipment around the world, such asindustrial robots in factories, conveyors that transport
goods at distribution centers, and cranes that load andunload cargos at ports, thereby supporting our society and daily life. We have launched our global brand“Sumitomo Drive Technologies” based on our mission

Operating Profit

CAPITALS

Segment features(The Sources of Our Strengths)• Wide range of products• Global network• Extensive customer base across multiple
industrial fields• High-precision, high-response control
technologies

devices and electric vehicles (EV) in Europe and theUnited States, contributing to a significant year-on-yearincrease in orders for the segment as a whole. Net sales
and operating profit also rose year on year in line withthe higher volume of orders.
At the same time, the rapid market recovery in thesecond half of fiscal 2021 led to market disruptions
arising from a shortage of raw materials for semiconductors, electronic components, castings, electromagnetic
steel sheets, etc., as well as soaring prices across theglobe, which have affected our production. In addition,transportation costs have likewise skyrocketed and contributed to higher costs.

SHI WAY

Segment strengths

Despite the lingering effects of COVID-19, the sluggish
market conditions have recovered to some extent.
In Japan, demand for capital investments grew,
while there was stronger demand overseas for small
and medium-sized gear reducers, as well as for highprecision gearboxes for robots and motors, especiallyin North America. Other regions also showed signsof recovery, including Europe and China. Orders forannealing systems and stages for semiconductor-related
applications were also strong, reflecting the brisk
semiconductor market.
In particular, orders for high-efficiency motors andinverters rose in the second half of the fiscal year bytaking advantage of the demand for energy-saving

Business
Overview

Industrial Machinery
Looking back on fiscal 2021

• Saving energy in the course of plastic molding and semiconductor production• Saving resources by molding thin, lightweight plastic objects• Contributing to advanced medical diagnosis and providing medical care that
does not compromise QOL• Supporting the development of advanced semiconductor production processes

Segment features

Net Sales Ratio by Region (FY2021)¥289.0 billion

OrdersOthers 5.6(2.4%)

Operating Profit

Japan 80.4
(34.9%)

Europe 37.0
(16.0%)¥230.6 billion

Net Sales

North America 19.2
(8.3%)(¥ billion)

Total 230.6
China 56.8
(24.6%)¥19.3 billion

Outlook for fiscal 2022/Future plans (directions and new initiatives)
In the area of plastics machinery, demand for injection
molding machines is expected to persist to some extent. However, as compared to the previous fiscal year,
the decline in the demand associated with the electricaland electronics industries in China, the shortage ofparts required for production in Japan and overseas,
as well as the soaring cost of materials, particularly the
spike in energy prices in Europe resulting from Russia’s
invasion of Ukraine, are all expected to have a significant impact on our business performance and delay
the recovery from our current situation. In view of thesefactors, orders, net sales, and operating profit are expected to decline year on year.
Orders, net sales, and operating profit for cryocoolers
are expected to rise year on year as demand from thesemiconductor industry as well as the MRI and physics/

OrdersNet Sales

Operating Profit/Operating Profit Ratio(¥ billion)(¥ billion)(¥ billion)

300.0

40.0

Operating Profit Ratio (right) (%)
12

30.0

8.4 8.7

300.0

289.0 280.0 287.0

264.0

283.0

230.6
200.0

Operating Profit (left)

19.3

30.5

New
initiatives• Target advances in automation/electric molding• Emphasize materials recycling

9

23.0
6

100.0
3

10.0

0

(Others)• Establish competitive advantage in specific semiconductor production equipment fields• Expand automobile-related businesses in line with the shift to electrification• Target business growth in advanced medical fields

CORPORATE DATA

100.0

Directions

10.9

200.0
20.0

(Plastics Machinery)• Develop eco-friendly plastics and technologies, including recycled plastics• Strengthen global collaboration and regional strategies

2017 2018 2019 2020 2021 2022 2023
forecast target

(FY)

0

40 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

2017 2018 2019 2020 2021 2022 2023
forecast target

(FY)

0

OUTCOME

Asia 31.5(13.7%)

chemistry sectors will likely remain high as in the previous fiscal year.
In the area of semiconductor production equipment,
the semiconductor market is expected to continue
growing in the medium to long term. However, orders
are expected to decline year on year in view of the large
orders received in the previous fiscal year. Net sales andoperating profit are expected to rise year on year due tothe high order volume in the previous year.
In the area of medical equipment, industrial equipment, and forging presses, orders, net sales, andoperating profit are expected to rise year on year due
to the strong demand for medical equipment, forging
presses, and especially equipment related to semiconductor production that falls under the category ofindustrial equipment.

SHI MATERIALITY(FY2021)For semiconductor production equipment, we manufacture ion implantation devices that implant ions withhigh precision into silicon wafers to control their semiconductor electrical properties.
Other products include medical equipment that harnesses cyclotron technologies for the diagnosis andtreatment of cancer, forging presses used at automobile
manufacturing plants for the production of metal parts,
and industrial equipment.

BUSINESS ACTIVITIESInjection molding machines are plastic processing machines that fabricate various products by injecting hot
plastic into molds. We specialize in the field of precision,
high-cycle molding.
Our cryocoolers is not only used in medical devices
such as MRI and in advanced scientific fields (especially in the fields of physics and chemistry) but also incryopumps to create the ultra-high vacuum environment
required for semiconductor production processes.

CAPITALS• Wide range of machine element technologies• Materials processing technology• Accelerator/cryogenic technologies(The Sources of Our Strengths)

Value we aim to provide

aggressive capital investment by semiconductor manufacturers in the face of the ongoing global semiconductor shortage. Orders rose significantly year on year due
in part to some semiconductor manufacturers bringing
forward their investment. Net sales declined year on
year as there was a reversion of the strong net sales infiscal 2020 coupled with the modest volume of orders
in the previous year, while operating profit declined
year on year due to a change in the composition of themodels sold.
In the area of medical equipment, industrial equipment, and forging presses, orders rose significantly
year on year due to the strong net sales of equipment
related to semiconductor production that falls under the
category of industrial equipment, while net sales andoperating profit were flat year on year.

SHI WAY

Segment strengths

In the area of plastics machinery, demand was particularly strong in the first half of fiscal 2021 owing to theelectrical and electronic industries in China, whosemarket conditions had recovered from the previous
year. In the second half of fiscal 2021, demand also grewin other regions, particularly in Europe, even as market
conditions were still affected by COVID-19. Domestic
demand in Japan recovered as the number of COVID-19
cases declined, and orders, net sales, and operating
profit all rose year on year.
Orders, net sales, and operating profit for cryocoolers
rose year on year as a result of strong demand from thesemiconductor industry as well as a recovery in the MRI
and physics/chemistry sectors from the previous year.
In the area of semiconductor production equipment,
the high demand for semiconductor production equipment and market expansion continued as a result of2017 2018 2019 2020 2021 2022 2023 (FY)
forecast target

0

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 41

Business
Overview

Logistics & Construction
Looking back on fiscal 2021

• Canning technology for large structures• Mechanical design technologies• Service network• Improve social infrastructure• Support disaster recovery• Providing advanced logistics solutions to address increasingly sophisticated infrastructure requirements

Net Sales Ratio by Region (FY2021)

Orders¥400.1 billion

Net Sales¥341.4 billion(¥ billion)

Others 15.4
(4.5%)
Japan 144.5(42.3%)

Europe 16.2
(4.7%)

North America 101.2(29.6%)

Total 341.4

In terms of demand for hydraulic excavators by region,
public investment in building national resilience and restoration work undertaken to address the damage caused byfrequent natural disasters will sustain a certain level of demand in Japan. In North America, orders are expected tobe firm and demand is expected to remain as high as in theprevious year despite persistent shortages in the supplyof machinery and parts, especially in the area of semiconductors. Although we expect demand in Europe to remain
as high as in the previous year, there is a risk of economic
recession sparked by Russia’s invasion of Ukraine. In China,both overall demand and demand among foreign-affiliatedcompanies are expected to decline. Demand in ASEAN is
expected to remain firm, but competition will likely intensify with the entry of Chinese companies into the market.
Orders, net sales, and operating profit are all expected torise year on year for the segment as a whole.

China 32.0
(9.4%)¥19.3 billion

Operating Profit

Outlook for fiscal 2022/Future plans (directions and new initiatives)

Orders(¥ billion)

400.0

Operating Profit/Operating Profit Ratio

Net Sales(¥ billion)(¥ billion)

400.1

400.0

361.0 371.0

300.0

30.0

372.0 379.0
341.4

20.0

19.3

18.0

6.0

4.8

10.0

0

6

3

100.0

2017 2018 2019 2020 2021 2022 2023
forecast target

(FY)

0

42 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

2017 2018 2019 2020 2021 2022 2023
forecast target

(FY)

0

2017 2018 2019 2020 2021 2022 2023 (FY)
forecast target

0New
initiatives• Utilize AI and develop automation technologies• Use remote technologies to strengthen service businesses

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 43

CORPORATE DATA

5.7

200.0

100.0

(Others)• Emphasize automation and remote control technologies• Address shift to electric mobile cranes; comply with high-level exhaust gas emission regulations• Provide global support

Operating Profit Ratio (right) (%)
9

23.0

300.0

200.0

Operating Profit (left)

Directions(Hydraulic excavators)• Develop electric excavators• Use ICT to develop and introduce more sophisticated construction machines• Comply with high-level exhaust gas emission regulations• Expand service and parts businesses

OUTCOME

Asia 32.1(9.4%)In the area of mobile cranes, demand in Japan is expected to decline year on year, while demand in North America
is expected to remain firm. Although we expect orders
in Japan to decline year on year, net sales and operating
profit are expected to rise year on year owing to strong
orders in fiscal 2021. In the United States, orders are expected to decline year on year and net sales are expected
to be flat year on year due to a shortage of parts requiredfor production despite firm market conditions. As a result,operating profit is also expected to be flat year on year.
In the area of material handling systems, orders are
expected to rise year on year as a result of the resumptionof investments, primarily in the steel industry, while net
sales are expected to rise year on year due to the higher
volume of orders received in the previous year. Operating
profit is expected to decline year on year due to a change
in the composition of the models sold.

SHI MATERIALITY(FY2021)

Construction Cranes Co., Ltd. mainly sells crawler cranes
in Japan and overseas (except in the Americas), with amarket share of over 40% in Japan. In North America,
Link-Belt Cranes, L.P., LLLP mainly manufactures and sells
truck cranes and has a top-class share of the local market.
In the area of material handling systems, we manufacture industrial material conveyance systems, logistics
systems such as automated warehouses, as well as automated parking systems.

BUSINESS ACTIVITIESOur hydraulic excavators are mainly medium-sized, whichis the volume zone of the market, but we also produce
small and large excavators as well as application machinery and road machinery. Our products boast outstanding
fuel efficiency and have earned a reputation for theirsafety features in recent years, particularly the monitoring
devices used for the surveillance of the surroundings of
excavators. Meanwhile, our road pavement asphalt finishers hold a dominant market share in Japan.
In the area of mobile cranes, Sumitomo Heavy Industries

CAPITALS

Segment features(The Sources of Our Strengths)

Value we aim to provide

Orders and net sales for mobile cranes in Japan roseyear on year as demand in many regions showed signs ofrecovery compared to the previous fiscal year. Orders andnet sales in the United States also rose year on year, reflecting a recovery triggered by the resumption of various
economic activities. Operating profit in Japan declined
year on year as a result of the shortage of parts requiredfor production and soaring material costs, while operating
profit in the United States rose year on year on the back ofhigher net sales.
In the area of material handling systems, orders roseyear on year due to a higher order volume for logistics
systems and after-sales services, despite a lower volumeof orders for material conveyance systems. Net sales andoperating profit declined year on year as a result of fewer
large projects compared to fiscal 2020.

SHI WAY

Segment strengths

Demand for hydraulic excavators showed signs of recovery
in all regions except China since its decline in the previous
year due to COVID-19. In terms of net sales by region,
net sales in Japan rose only modestly year on year due
to the impact of logistics disruptions and the shortageof parts required for production on shipments, despite
market conditions in Japan remaining firm. While net
sales in Europe, the United States, and the ASEAN regionrose significantly year on year due to demand recovery,
demand in China grew year on year in the first half of the
fiscal year but slowed dramatically from the second quarter through the second half of the fiscal year, especiallyamong foreign-affiliated companies, resulting in a yearon-year decline in net sales over the entire fiscal period.
Overall, orders, net sales, and operating profit rose year
on year across the segment.

Business
Overview

Energy & Lifelines
Looking back on fiscal 2021

Value we aim to provide

Segment features

Net Sales Ratio by Region (FY2021)¥185.6 billion

OrdersEurope 20.0
(9.8%)¥205.1 billion

Net Sales

Operating Profit(¥ billion)

Others 20.1
(9.8%)

North America 11.6
(5.7%)

Japan 134.7(65.7%)

Total 205.1

Operating Profit/Operating Profit Ratio(¥ billion)(¥ billion)

250.0

20.0

211.0
200.0
150.0

100.0

100.0

50.0

50.0

2017 2018 2019 2020 2021 2022 2023
forecast target

(FY)

0

New
initiatives• Develop products that contribute to decarbonization• Further enhance our plant operation management technologies

44 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

8.9

205.1
172.0

184.0

15.0

10.0

0

Directions

Operating Profit Ratio (right) (%)
10.0

7.5

18.2
5.2 5.1

5.0

9.0 9.0
5.0

2017 2018 2019 2020 2021 2022 2023
forecast target

(FY)

0

2.5

2017 2018 2019 2020 2021 2022 2023 (FY)
forecast target

0

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 45

CORPORATE DATA

150.0

Operating Profit (left)

OUTCOMENet Sales(¥ billion)

185.6 190.0

resilience. Another trend is the movement towards concessions, wide-area expansions, and joint operation ofplants. Market recovery in terms of private-sector demandis expected to be modest, with orders, net sales, andoperating profit expected to decline year on year, partly
as a result of the transfer of our waste treatment businessin the previous year.
Orders for turbines and pumps are expected to be flat
year on year due to the lingering effects of COVID-19 on
the market, while net sales are expected to rise year on year
due to the higher volume of orders in the previous fiscal
year. On the other hand, operating profit is expected to
decline year on year as a result of higher fixed expenses.
In the area of ships, we expect orders for three vessels
as in the previous fiscal year, and we aim to improve profitability on this front.

•C ommercialize our offerings in liquefied air energy storage (LAES) and other renewableenergy markets•D evelop region-specific businesses through the use of biomass and other locally produced/
consumed energy sources• Wastewater recycling business development• Deploy IoT and ICT to optimize plant operation management manpower• Deploy bioreactors with a view to decarbonization• Strengthen global after-sales service businesses

China 1.3
(0.6%)

Orders200.0

In the area of energy plants, the business environment
in Japan will undergo a major paradigm shift this year as
the FIT scheme transitions to the FIP (Feed-in Premium)scheme along with the introduction and expansion of
distributed power sources. Emerging ASEAN economies,
particularly Indonesia, have begun to engage with theprospect of launching biomass projects, with new projects
starting to emerge. On the other hand, the decarbonization movement in Europe is gaining speed, and the market
for large boilers is shrinking rapidly. Orders are expected
to rise year on year due to several projects with high feasibility, but net sales are expected to decline year on year
due to a decrease in the number of projects. Operating
profit is also expected to decline accordingly.
In the area of water treatment plants, there has been
continued aggressive investment and a renewal ofold plants in Japan with the goal of building national

Asia 17.3(8.4%)¥18.2 billion

250.0

Outlook for fiscal 2022/Future plans (directions and new initiatives)

SHI MATERIALITY(FY2021)

catering to both private and public sectors.
In the area of turbines and pumps, we mainly manufacturesmall and medium-sized steam turbines used by factories
for in-house power generation and to generate electricity
for sale, as well as process pumps for oil refinery plants.
For ships, we have successfully achieved not only
high-quality products but also superior efficiency for our
manufacturing sites and designs through a strategy ofdifferentiation and concentration that is centered on themedium size tanker segment, especially Aframax tankers.

BUSINESS ACTIVITIESIn the area of energy plants, we provide the engineering,procurement, construction, and commissioning (EPC) of
power plants such as circulating fluidized bed (CFB) boilers, as well as other environmental equipment. In recent
years, we have been working on the commercialization ofliquid air energy storage (LAES) technology, which allows
for large-capacity energy storage.
For water treatment plants, we provide services ranging from facility design and construction to equipment
sales, repairs, and operation management, with a focus on

CAPITALS• Realizing a decarbonized, resource-recycling society• Realizing a recycling-oriented society through resource recycling• Ensuring a safe and reliable water supply• Using energy efficiently through heat utilization and recovery•D eveloping cutting-edge ships to reduce CO2 emissions and ensure stableenergy transportation(The Sources of Our Strengths)• High efficiency technologies• Manufacturing capacity and engineering,procurement and construction (EPC)
capability• Operations and maintenance (O&M)
know-how

attributed to COVID-19.
Despite the sluggish market conditions, orders forturbines and pumps rose year on year due to the resumption of some projects that had been stalled because of
COVID-19. While net sales declined year on year due to asmaller volume of backorders, operating profit rose year
on year as a result of a higher profit ratio compared tofiscal 2020.
In the area of ships, we received orders for three newvessels, the same as the previous year, which has ensured
approximately two years of operation as of the end of
March 2022. Net sales declined year on year due to a decrease in sales associated with the building of new vessels,
while operating profit declined year on year as a result of
the soaring cost of materials, particularly steel.

SHI WAY

Segment strengths

In the area of energy plants, we delivered four CFB boiler
power plants utilizing Japan’s FIT (Feed-in Tariff) scheme
and received orders for three new biomass power plants.
Overseas, Sumitomo SHI FW received orders for threeboiler plants. As a result, even though orders declined
year on year due to differences in project value, net sales
exceeded 100 billion yen for the first time. Operating profit also rose year on year as a result of steady sales.
In the area of water treatment plants, orders rose year
on year due to the orders received for large projects,
primarily for the operation management of water treatment facilities. However, net sales and operating profit
declined year on year as a result of the smaller volume of
backorders at the beginning of the fiscal year comparedto fiscal 2020, longer delivery times for our products due
to a shortage of parts, and operational delays that can beBasic Sustainability Policy

BUSINESS ACTIVITIESEnhancement Corporate Enhancement
manage- of corporateof social
ment
value
value

1. W
 e shall provide products and services that contribute to economical and technological development
and aim for our sustainable growth.
2. We shall make every effort to minimize the environmental load in all of our business activities, including
the entire product life cycle. In addition, we shallprotect the safety, security and health of every person
involved in any corporate activities and create a workplace where everyone of us can work vibrantly.
3. W e shall ensure thorough corporate ethics and improve management soundness and transparency.

CAPITALS

Based on Sumitomo’s Business philosophy and
Sumitomo Heavy Industries Group’s management
philosophy, we conduct corporate management byenhancing both social and corporate value for the realization of a sustainable society.We have clarified theseideas as a basic sustainability policy.

(The Sources of Our Strengths)

The SHI Group is committed to sustainability-oriented management based on a mediumto long-term perspective with a focus on stakeholders. We have identified seven key
sustainability-related issues and are engaged in the appropriate efforts to mitigate medium- to long-term risks, including the risks associated with climate change, while working toaddress social issues through our business activities. At the same time, we are making every
effort to enhance our corporate governance and ensure compliance throughout our Groupin order to further strengthen our business foundation.

The SHI Group has consistently made an effort since its establishment to contribute to the sustainable developmentof society by providing a diverse range of products and services that support social infrastructure and the production
activities of customers. Going forward, we will continue to tackle front-on the complex social issues encapsulated by the
SDGs as well as the ESG-related issues that all companies are required to address as we strive to achieve sustainablegrowth as a company and realize a sustainable society.

SHI WAYSHIMATERIALITY

Sustainability at the SHI GroupKey Sustainability Issues

Manufacturing
CapitalIntellectual
CapitalFinancial
CapitalHuman
CapitalAdvanced
technologicalcapabilities andcollective strengths
that contribute to
the sustainable
development ofsociety

Prioritize
employee safety,
health, anddevelopment

Automation of
products tosave manpower

Contribute toaction against
climate change andthe creation of arecycling-oriented
societyEnhance laborproductivity
and safety
for clients

Emphasize
coexistence
and co-prosperity
with local
communities
Strengthen
governance

Enhance
information
disclosure

Applicationof advanced
technologies(beam control,
cryogenics, vacuum
technology,
etc.)

Foster well-being
and improve
quality of life

Creationof sharedvalue

have narrowed down ESG material issues based on thefollowing two axes: the scale of impact on the society
and how important those issues are to our company. At
management meeting and business strategy committee, which are made up of executive officers, we reported on the progress of these activities and confirmedthat there were no objections to the narrowed down
ESG material issues.

Identification Process(1) Extraction of Issues
We identified the key sustainability issues that machinery manufacturers are required to address based on the
SDGs as well as the standards of SASB, ISO 26000, and
GRI, and with reference to the initiatives of other companies in the same industry.

(3) Expert Hearings
We consulted with sustainability experts to assess thevalidity of the material issues we have identified. Wethen reviewed the materiality of these issues basedon the feedback that material issues for value creation
should include not only environmental issues but alsosocial issues (e.g., declining workforce).

(2) Narrowing Down of Issues
Through dialogue on ESG material issues with 14 head
office divisions and 15 main business divisions, as wellas listening to the opinions of external advisors, we(4) Resolutions at the Board of Directors Meetings
The Board of Directors passed a resolution containing
these material issues as a key management resolution at
its meeting in March 2020.

Priority issues for strengthening
our business foundation

46 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 47

CORPORATE DATA

Energy&Lifelines

Optimization of
products toconserve energy
and resources

Ensurehighproduct
quality

Industrial
Machinery

Logistics&
Construction
A corporate
culture ofalwaysembracing newchallenges

Reduceenvironmental
burdenCreatebetterways to live
and work

Superior
management
capabilities thatcreate social
value andcorporate value

SocialCapitalNaturalCapitalMechatronics

Priority issues
for value creation

Through a resolution passed by the Board of Directors
in 2020, the SHI Group has identified seven material
issues from both the perspectives of their importanceto society and stakeholders as well as their importanceto the SHI Group itself. Through our efforts to addressthese material issues, we seek to meet the expectationsof our stakeholders while pursuing our vision of achieving sustainable growth for the Group.

OUTCOMESTRENGTH(The Sources of
Our Strengths)

SHI
MATERIALITY

OUTCOMESHI MATERIALITYCAPITALS

BUSINESSACTIVITIESOUTPUTSustainability at the SHI Group

Aligning our Business with Human Rights

The Seven Material Issues
Material issues for value creation
1. Environmental Load Reduction

Material issues for strengthening
our business foundation
3. Ensuring Product Quality

Related pages: Manufacturing Capital (Pages 18 to 19)

Interview with technical intern trainees conducted by the Executive Director of ASSC

Related pages: Social Capital (Pages 29 to 30)

Internal Measures Aimed at Instilling Awareness6. Strengthening governanceWe believe that medium- to long-term education andactivities aimed at raising awareness that have been
carefully planned and tailored to each level and position are vital to the promotion of sustainability-oriented
management. To this end, we have implemented avariety of measures aimed at achieving this goal.

As a corporate group with a global value
chain, we believe that corporate ethics, robust
compliance, and risk management are essential building blocks for the sustainable growthof our business. We will also continuously strengthen
our corporate governance in order to enhance thesoundness and transparency of management.
Related pages: Corporate Governance (Pages 54 to 56)

7. Enrichment of Information Disclosure
We recognize that building stronger relationships with our stakeholders is fundamental tosustainability-oriented management, and we
strive to disseminate information and communicate with them through various mediums. Throughongoing communication with all stakeholders, we arecommitted to understanding the diverse expectations
they have of our Group and further refining our modelof sustainability-oriented management.

1. Executive training sessions
We invite experts to conduct sustainability training
sessions at least once a year for directors and other officers to help them understand ESG risks, megatrends,
international sustainability trends, as well as examples of
initiatives undertaken at other companies.
In July 2022, we invited Ms. Chikako Matsumoto,Executive Officer & General Manager of ESG Strategy
and Solutions at Sumitomo Mitsui Trust Bank, to deliver
a talk on the essential challenges that we need to takeon for our Group to achieve sustainable growth from thestandpoint of a financial institution. This talk was attended by 35 members of the Sustainability Committee,

who had the opportunity to learn more about the latest
global trends in ESG investment, the rationale behind theevaluation criteria, ESG-related challenges in the sectors
to which the Company belongs, as well as trends in thefinancial market that affect our investments and loans.

2. M easures aimed at raising awareness of sustainability among all employees(1) Sustainability e-learning (conducted once a year)(2) D issemination of information using internal communication tools1) Serialized articles on sustainability published in the
SHI group magazine
2) Dissemination of sustainability-related news
through our in-house portal site(3) Original learning tool (online card game)

CORPORATE DATA

4. Safety, Health and Education of Employees
We believe that the management of humanresources is a particularly significant theme
for our Group in order to further accelerate
globalization and provide first-class products

Executive training session conducted in July 2022

48 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

OUTCOMEAs an integrated machinery manufacturer, we
believe that it is our responsibility to continue
to provide our customers with a stable supplyof high-quality, safe, and reliable products
and services. We also believe that product quality is not
only about the product’s functional properties but also
involves important attributes such as its safety for users
and the environment. We therefore strive to improve
our product quality from multiple perspectives.

investigation also involved on-site inspections ofworking environments and living spaces, as well asinterviews conducted with the trainees themselves.
ASSC concluded that there were no major issues
with the trainees’ living spaces and working environment. At the sametime, we received
feedback on areas
for improvementthat we will continue to work on
moving forward.

SHI MATERIALITY

Japan’s declining workforce in recent years
due to its declining birthrate and aging
population has become a social issue of great
concern. We are working to alleviate theoperational burden on our customers and end-users, reduce the number of working hours, and improve safety
through the automation and digitalization of our products. We hope to contribute to work-style reforms andbetter lifestyles for people working in various industries
through these efforts.

With numerous business sites based in Japanand overseas, we believe that making contributions to local communities and fosteringa spirit of coexistence and co-prosperity are
essential for business continuity. We will contribute to
the development of local societies and communities byengaging in social contribution activities that leverage
the resources and strengths of our Group. Through suchactivities, we seek to strengthen employee engagement
and raise social and environmental awareness, which inturn promotes the sustainable growth of our Group.

In order to strengthen the alignment of our businesswith human rights, we have launched a cross-divisioncompany-wide project to study and assess potential
human rights risks that exist within the Company.
Our results found that foreign technical interntrainees are a group that experiences one of thehighest risks of human rights violations in Japan. In
view of this, we partnered with The Global Alliancefor Sustainable Supply Chain (ASSC) in July 2022
for them to lead an investigation into the working
environment at our various divisions as well as subsidiaries and affiliates where a large number of ourtechnical intern trainees are attached. In addition
to reviewing internal documents and reports, the

BUSINESS ACTIVITIES

2. Realization of a better life and working style

5. Co-existence and Co-prosperity with Communities

Case study: An investigation into the working environment of foreign technical intern trainees

CAPITALS

Related pages: N atural Capital (Pages 31 to 34), Addressing Climate
Change Risks (Pages 50 to 53)

Related pages: Human Capital (Pages 24 to 28)

As a global business enterprise, the SHI Group recognizes the importance of taking human rights into consideration
throughout its entire value chain. In 2021, we launched a company-wide human rights project to identify major humanrights risks and establish a management system to address these risks.

(The Sources of Our Strengths)

As a machinery manufacturer focusing on
business-to-business products, we recognize
the importance of both reducing the environmental burden of our own operations—including our manufacturing processes—and reducing
the environmental burden of our customers when theyuse our products. We have therefore been engaging inefforts on both fronts. We also believe that the effective use of resources not only reduces waste but also
brings about a reduction of our environmental impact
in various ways, including through the reduction of CO2
emissions associated with the procurement of raw materials, which affirms our commitment to the creation of acircular economy.

and services that meet the needs of society in a sustainable manner. Based on our ethos of “Our Business Is thePeople,” which runs throughout the SHI Group, we will
not only put safety as our top priority in all our business
operations but also actively engage in health management, organizational development, and human resource
education.

SHI WAYe Enhancement- of corporate
value

Our in-house portal site

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 49

Addressing Climate Change Risks
Strategies
reduction targets through 2030 as we step up our efforts to address climate change.
*1 TCFD (Task Force on Climate-related Financial Disclosures)
TCFD is a special private-sector-led organization formed at the request of
the G20 and composed of members from a wide range of economic sectors
and financial markets around the world, including major corporations andcredit rating agencies. It recommends that companies evaluate the financial
impact of climate change risks and opportunities on their operations anddisclose their governance, strategy, risk management, metrics and targets.

2. A scenario in which no effective measures have been
implemented and the temperature rises by 4°C

Governance
The Sustainability Committee reports the results of its
deliberations to the Board of Directors twice a year andpromotes the relevant initiatives under the supervisionand direction of the Board of Directors.

Based on these scenarios, we have identified theimpact of stricter regulations on our business as thegreatest risk and have decided to focus on adopting
measures to mitigate this risk.

Risk Management Committee (at least twice per year)
The Risk Management Committee, which is chairedby the President & CEO, identifies risks that have asignificant impact on the Group and adopts measures
to mitigate them.

The 1.5°C scenario assumes the impact of stricter
regulations aimed at reducing CO2 emissions on ourbusiness activities and transition risks such as the increased burden on our business costs as exemplified
by the carbon tax. One high-level risk is the tighteningof regulations on thermal power generation using fossil
fuels. In addition, the higher demand for energy-saving
Priority Level

1.5°C
scenario

4°C
scenario

Opportunities

High

Stricter regulations on power generation using fossil fuels

Stable supply of renewable energy

High

Stronger requirements in terms of energy-saving performance

Higher demand for energy-saving products

Stricter regulations on internal combustion engines

Higher demand for electrification and fuel conversion

Higher carbon tax and raw material costs

Higher demand for energy- and resource-saving products

Increasingly severe natural disasters

Higher demand for disaster prevention infrastructure

Rising sea levels (long-term)

Higher demand for construction machinery for disaster recovery

MediumLow

Climate Change Response Promotion System

Risks

MediumLow

President and CEO
Risk Management Committee

Sustainability Committee

Laboratories, Local Offices

50 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Group companies

evaluate the contribution of our Group’s products to reducing CO2 emissions following their delivery to customers. For instance, our products support the decarbonization of production processes through electrification at
our customers’ production sites and resource conservation from a lower failure rate. Moreover, since our Group
provides products and technologies that support the
manufacturing process of power semiconductors, we areable to contribute to the impact of various energy-saving
products that utilize power semiconductors.
In these various ways, we are currently implementing
and considering further measures that allow us to contribute to the reduction of CO2 emissions in society as awhole through our Group’s products.

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 51

CORPORATE DATA

Business Divisions

Sustainability Department of
the Corporate Planning GroupIn our pursuit of the reduction of CO2 emissions from product use, we are exploring the possibility of implementing
decarbonization measures that include those in areas thatcannot be counted toward a reduction of our CO2 emissions based on the definition of Scope 3 emissions.
1) Measures that can be counted toward a reduction of our
CO2 emissions based on the definition of Scope 3 emissions (CO2 emissions reduction in the narrow sense)
2) Measures that cannot be counted toward a reductionof our CO2 emissions based on the definition of Scope 3
emissions but can indirectly contribute to the reductionof CO2 emissions in the value chain after product delivery(CO2 emissions reduction in the broad sense)
Tracking CO2 emissions reduction in the broad sense
is a unique approach of the SHI Group that seeks to

OUTCOME

Board of Directors

SHI MATERIALITY

Sustainability Committee (at least twice per year)
The Sustainability Committee, which is chaired by the
President & CEO, deliberates on the progress of measures implemented for the material issues and reports
to the Board of Directors.

BUSINESS ACTIVITIESIn addition to identifying the reduction of environmental
impact as one of the seven sustainability material issues
resolved by the Board of Directors in 2020, we have also
designated climate change as one of the social issues
that our Group should contribute to addressing in our
Medium-Term Management Plan 2023.
The Risk Management Committee, which is responsible for our company-wide risk management, has
positioned climate change risk as a material risk issue
and is currently performing the appropriate risk management for this risk under the supervision of the Boardof Directors.
The Sustainability Committee, which is chaired by the
President & CEO, focuses its deliberations on addressing the issue of climate change by approaching it not
only as a risk but also as a source of business opportunities for our Group.

CAPITALS

1. A scenario in which measures are implemented andtemperature increase is limited to 1.5°C or lesstechnologies among customers in their manufacturing
processes will call for the development and provision ofeven more energy-saving products. On the other hand,based on our analysis, the impact of stricter regulations
on internal combustion engines for construction machinery and other equipment will emerge over a relatively longer time frame, as it will take time to develop
alternative technologies for heavy machinery, develop
the necessary infrastructure, and make the required
adjustments to international standards and regulations
in various countries. While this scenario assumes higher
carbon tax and raw material costs, their impact is limited in our analysis as they only account for a small percentage of our overall costs.
The 4°C scenario assumes an increase in physical risks
that are exemplified by increasingly severe extreme weather events. The severity of natural disasters is designatedas a medium-level risk, and we anticipate the need tostrengthen our business continuity plan (BCP) not only at
our manufacturing sites but also across our entire supply
chain. In addition, while rising sea levels could have an
impact on our manufacturing sites in coastal areas in thelong term, we have assessed their impact at the 10-year
mark to be relatively minor.
As a machinery and equipment manufacturer thatoffers a diverse range of product lines, we will evaluate
the risks and opportunities by dividing our business into
two segments: segments that will be significantly affected by climate change and other segments. This willallow us to achieve our goal of expanding our businessby mitigating risks while creating new opportunities.

(The Sources of Our Strengths)

The Paris Agreement, which came into effect inNovember 2016 as a response to global climate change,
calls for efforts to keep the global average temperaturerise to well below 2°C, and preferably within 1.5°C, as
compared to pre-industrial levels. In view of this, ourGroup has taken action by developing a long-term planin line with the Paris Agreement. We have assessed theimpact of climate change on our Group as the first stepin formulating our strategy. The target period for ourrisk assessment was designated as the next 10 years,
given that the effects of climate change on the productsof our Group have already become apparent. We thenconducted analyses of two different scenarios involving
a 1.5°C and a 4°C rise in temperature, respectively.

SHI WAYIn October 2021, we accepted the recommendations of
the Task Force on Climate-related Financial Disclosures(TCFD)*1 in order to strengthen our response to climate change risks. In May 2022, the Board of Directors
passed a resolution to set the target of achievingcarbon neutrality (net-zero CO2 emissions) across theentire SHI Group by 2050 along with our CO2 emissions

Board of
Board
Directorsof Directors

Addressing Climate Change Risks
President
President
and CEO
and CEO
Risk Management
Risk Management
Committee
Committee
Category

Specific examples
Addressing social issues through our products and services (CSV)Strengthening R&D: Developing energy-saving and decarbonization-friendly products
Revising our product portfolio: Shifting toward energy-saving and decarbonization-friendly products
Transitioning our business model: Shifting from product sales toward subscriptions, etc.

Our approach: CO2 emissions reduction in the
broad sense

Sharing value creation stories

Measures that cannot be counted toward a reduction of our CO2 emissions based on the definitionof Scope 3 emissions but can contribute to the
reduction of CO2 emissions in society as a whole

Supporting energy-saving and decarbonization efforts at the production sites of our customers:
Electrification, resource conservation
Supporting energy-saving and decarbonization efforts in society as a whole through our customers:
Stable supply of renewable energy through energy storage

Energy & Lifeline Power plants

Mechatronics

Risks

Opportunities/Solutions• Growing demand for a transition to energy supply systems• Government restrictions on coal-fired powerwith a smaller environmental impact (biomass and energy
generation
storage businesses, etc.)• Stricter regulations on biomass power generation• Growing demand for the remodeling of existing coal-fired
using uncertified fuels
power plants into biomass co-firing power plants• Growing customer demand for reduced CO2• Acceleration of the electrification of production facilities
emissions during manufacturing and use of prodPower transmis• Improvement in the value of high-efficiency products
sion & control
ucts and solutions that meet their requirements• Growing demand for systems that integrate electronic andequipment• Stricter government regulations on the power
control devices with gear reducers
efficiency of motors

52 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

deliberations by the Board of Directors so that improvement measures can be implemented.
The Risk Management Committee, which meets twice ayear, identifies risks that have a significant impact on ourGroup and assesses the priority level of each identified
risk for the Company by evaluating its frequency of occurrence and the magnitude of the resulting impact when it
occurs. The Risk Management Committee assigns eachidentified risk to a division to ensure that the risk is managed appropriately while supervising the progress madein this regard. Climate change has been positioned as amaterial risk issue by the Risk Management Committee.

Reduction of CO2 emissions during use of our products
Scope 3Scope
Cat. 11
3 Cat. 11

Scopes 1Scopes
and 2 1 and 2
50% compared
reduction compared
50% reduction
to FY2019 to FY2019

Efficiency improvement,• Efficiency improvement,
loss reduction loss reduction
30% reduction
30% compared
reduction comparedto FY2019 to• FY2019• Fuel efficiency• Fuelimprovement,
efficiency improvement,
fuel switch fuel switch• Change in product• Change
portfolio,
in productetc. portfolio, etc.

• Continuation•ofContinuationenergy conservationof energyactivity
conservation activity• Replacement•ofReplacement
equipment, ofreformationequipment,of reformation of
production process
production process• Purchase of renewable• Purchaseenergy,of renewable
etc. energy, etc.

CO 2 emissions
CO 2 emissions

2019

2030

2019

Net zero emissions
Net zero emissions

Net zero emissions
Net zero emissions

2030

2050

CO 2 emissions
CO 2 emissions

2050

2019

2019

2030

2030

2050

2050

* Indirect GHG emissions not included in Scope 1 or Scope 2 that come from the use of products sold.

Besides implementing various measures aimed at
reducing CO2 emissions during manufacturing, we havealso started to procure renewable energy in fiscal 2022.
We have introduced a policy of reflecting CO2 emissions
for each division within the SHI Group in our businessevaluation through the implementation of an Internal
Carbon Price.
In response to the increasingly severe extreme
weather events in recent years, we will strengthen ourbusiness continuity plan (BCP) at our manufacturing
sites and across our entire supply chain. In April 2022,
we established a dedicated BCP department within the
General Administration Group whose role is to formulate and implement an effective BCP for the SHI Group.
We have been conducting environmental improvement

activities with the recognition that global environmental
conservation and circular economic activities are corporate social responsibilities. We have also been working to
reduce our environmental impact by aiming to achieve
the targets set for the current three-year period in our
Medium-Term Environmental Plan, which is formulated
once every three years.
Under our 6th Medium-Term Environmental Plan thatbegan in 2020, we are working to reduce CO2 emissions
from our Group’s manufacturing sites (Scope 1 andScope 2) by 1% per year compared to fiscal 2019. Alongwith this, we will step up our efforts to procure renewable energy in order to achieve our target of a 50%
reduction by 2030 in a self-reliant manner.
See page 33 for more details on our 6th Medium-Term Environmental Plan.

Climate Change-Related Reduction Targets (Excerpt from the 6th Medium-Term Environmental Plan)
6th Medium-Term Environmental Plan (FY2020–FY2022)
Item

Base year

Achievement
year

2019

2022

• (Japan + overseas) 3% reduction compared to FY2019

2019

2022

• Establish emission targets for product usage

2008

2022

• Expand Sustainability Plus Products (more than 23 models)

2009

2022

Target value• 3% reduction in FY2022 compared to FY20191) Reduce CO2 emissions(total volume) (Japan)2) Reduce CO2 emissions(total volume) (global)
3) Reduce CO2 emissionsof products• Abolish the use of heavy oil (fuel conversion)• Expand investment in energy conservation• Consider installation of renewable energy equipment (new buildings)

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 53

CORPORATE DATA

Our business operations are monitored by the Budget
Council, which meets twice a year and comprises the
President & CEO as well as other members of senior
management. In formulating our Medium-Term
Management Plans, backcasting is performed with theaim of addressing social issues that would become
relevant in the next 10 years before business plans areformulated by evaluating the risks and opportunities foreach business division. Segments whose management
is expected to be significantly impacted by issues suchas CO2 emissions during the use of products by customers and business scale are flagged for more focused

Reduction of CO2 emissions from our group

OUTCOME

Risk Management• CO2 emissions during product use (Scope 3, Category 11*): 30% reduction by 2030 (compared to FY2019)

SHI MATERIALITY

Main products• CO2 emissions during product manufacturing (Scopes 1 and 2): 50% reduction by 2030 (compared to FY2019)

BUSINESS ACTIVITIES

Segment

Impact on our Mechatronics segment
With the acceleration of the current trend toward theelectrification of hydraulic-drive mechanisms at manufacturing sites, demand for inverters and motors is
expected to grow. It is therefore vital for us to respond
appropriately to market changes and expand our business opportunities. As we anticipate a growing customer demand for the supply of products with even better
energy-saving performance, we will develop not only
inverters and high-efficiency motors but also monitoring
systems for motors as well as novel solutions that integrate electronic and control devices with gear reducers.

• Aim to achieve carbon neutrality throughout the entire SHI Group by 2050

CAPITALS

Impact on our Energy & Lifeline (E&L) segment
The demand for coal-fired power plants is already on a
downward trend with the transition to a decarbonized society. Therefore, we have shifted the focus of our Group’s
power plant business toward biomass power plants.
In the course of our business operations, we areclosely monitoring market trends in biomass power generation, which is believed to be carbon-neutral, as we

expect existing regulations on CO2 emissions generated
during fuel transportation to be tightened.
We also strive to contribute to the stable supply of renewable energy for society as a whole through initiatives
such as the development of energy storage systems.

(The Sources of Our Strengths)

Business risks and opportunities
The SHI Group is a machinery and equipment manufacturer that offers a diverse range of product lines. We
have conducted an evaluation of the risks and opportunities by focusing on our Energy & Lifeline segment
and Mechatronics segment, where the impact on ourbusiness is expected to be relatively larger due to thehigher volume of CO2 emissions in the course of using
products in these segments.

Sustainability
Committee
In MaySustainability
2022,Committee
the Boardof Directors passed
a resolution
tax,
Sustainability
Sustainability
Department
Departmentof we haveof set emissions reduction targets for our
to set the target of achieving carbon neutrality
acrossmanufacturing
sites under Scopes 1 and 2. In addition,
the Corporate
theCorporate
Planning
Planning
Group
Group
the entire SHI Group by 2050 along with CO2 emissions
in order to expedite our transition to a decarbonizedsociety through the provision of products and services
reduction targets through 2030 on the way to achieving
that
constitute the businessof our Group,
thisBusinessgoal. Business
Divisions
Divisions
Laboratories,
Laboratories,
Local Offices
Local
Offices
Groupfoundationcompanies
Group companies
we have set reduction targets for CO2 emissions during
The SHI Group has designated CO2, one of the mostabundant greenhouse gases, as the target of its priority
product use (Category 11), which account for the largest
measures and has set reduction targets for the total
proportion of emissions among the 15 categories ofamount of CO2 emissions. As a countermeasure against
Scope 3 emissions. Scopes 1 to 3 emissions are calculated in accordance with the Greenhouse Gas Protocol.
the potential transition risk of a future increase in carbon

SHI WAY

CO2 emissions reduction in the narrow sense
Measures that can be counted toward a reductionof our CO2 emissions based on the definition of
Scope 3 emissions

Indicators and Targets

Corporate Governance

General Meeting of Sharehold

Strengthening Our Corporate GovernanceSupervision
efficient and transparent management structure, as wellas to increase its corporate value and enhance the evaluation and confidence of various stakeholders.

Our Initiatives to Strengthen Corporate Governance
2015

2016

2017

2018

2019

2022

2020

2021

2022

• Formulation of a Corporate Governance
Basic Policy• Launch of Board of Directors
effectiveness evaluations

2015
Key Reforms• Introduction of a stock purchase remuneration
2017for officers2018
2019
system

2016• Increase in the number of external
directors from two to three• Formulation of a Corporate Governance
Basic Policy• Introduction of a stockbased remuneration
system for officers• Launch of Board of Directors
effectiveness evaluations

2/10
20%

2/10
20%

2/10
20%

2/10
20%

2/9
22%

3/10 in the number
3/9of external 3/9• Increase
30% from two 33%
33%
directors
to three• Introduction of a stockbased remuneration
system for officers

Composition of the
Corporate
Governance System
Board of Directors

2/10

2/10

2/10

2/10

2/9

3/10

3/9

3/9

Supervision

Audit

RemunerationGovernanceCommittee
Corporate
System Chart

Corporate Auditor’s Dept.

Internal
Auditing

Internal
Audit Dept.

Internal
ControlInternal
Control Dept.
Internal Auditing

Each Division(Head Office)

Board of Directors:

Board of Corporate Auditors:

9 directors

4 corporate auditors

3 external directors

2 external corporate auditors

54 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

1 femalecorporate auditor

ControlSupportOperation Divisions
Business
Divisions

Subsidiaries
and Affiliates

Corporate
AuditorsAudit
at Subsidiaries
Audit and Affiliates

Corporate
Auditors
at Subsidiaries
Audit and Affiliates

Board of Corporate Auditors:

9 directors

4 corporate auditors

3 external directors

2 external corporate auditors
1 femalecorporate auditor

Executive & Operating Officers Committee

Management Strategy Committee
The Management Strategy Committee, chaired by the
President and CEO, consists of directors and others appointed by the President and CEO. It deliberates on matters to be
discussed by the Board of Directors, including the importantmanagement strategies and business strategies concerning
the SHI Group, and equivalent important decision-making
matters, as an advisory body to the President and CEO. It
reports the results of deliberations to the President and CEO.
The Management Strategy Committee meets once a month inprinciple, but may meet at any time as appropriate.

Key Areas of Deliberation for the Board of Directors
Sustainability• Formulation of the Basic Sustainability Policy• E stablishment of reduction targets for CO 2
emissions

Compliance• Reports on the deliberations of theCompliance Committee

Technology/Quality• Development strategies• Status of product quality improvements

Risk management• Reports on the deliberations of the Risk
Management Committee

Audits• Reports on the plans and results of audits
conducted by corporate auditors

Other matters• C apital investments

General Meetings of Shareholders • Convocation of Ordinary General Meetings of Shareholders
Settlement of accounts, etc.

• Budgets and financial results• Formulation of medium-term management plans
Medium-term management plans• Reports on the progress of medium-term management plans
Business plansfrom each business division

Governance• Taking action in response to Japan’s revised Corporate
Governance Code• Board of Directors effectiveness evaluations• Implementation of dialogues with shareholders• Revision of the stock-based remuneration system for officers• Progress of succession plan for the CEO and other top executives• Revision of the system of advisory bodies, etc.
• Appointment of officers and other key HR matters

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 55

CORPORATE DATAInternal
ControlPresident and CEO
Operation Divisions
Internal
ControlSupport Group Committees
Internal
Each Division
Control Dept.
Management Strategy Committee• Sustainability
CommitteeSubsidiaries
Business
Audit Dept.
(Head Office)Internal Auditing• Risk Management
DivisionsCommittee
and Affiliates
Executive & Operating Officers Committee• Compliance Committee
Internal
Auditing

Audit• Risk Management Committee
Audit
Corporate Auditor’s Dept.
• Compliance Committee

Board of Directors:

OUTCOME

Remuneration
Executive Committee& Operating Officers Committee

Supervision

Independent AuditorIndependent Auditor

General Meeting of Shareholders
President and CEO
Audit
Selection andCorporate
Auditors/Group
Committees
Board of Directors
Nomination
Committee
Board of Corporate
Auditors
Management
Strategy Committee• Sustainability
Committee

The Board of Corporate Auditors is currently comprised offour corporate
five corporate auditors),
Executive &auditors
Operating(limited
Officers to
Committee
including the chairman, served by a standing corporate auditor, and two external corporate auditors. Highly effective
Internal
Internal
Controlaudits are conductedby external
corporate
auditors who
Internal
Auditing
ControlSupportInternal
Each Division
capitalize
on advanced expertise
Control andDept.a wealth of experience
Audit Dept.
(Head Office)in various
fields, as well as by standing corporate auditors
Internal Auditing
who capitalize on their expertise and wealth of experiencein the Company’s management. They also provide theiropinions actively to the senior management at meetings,
including those of the Board of Directors and the Executive& Operating Officers Committee. The Board of Corporate
Auditors meets once a month in principle but may meet atany time as appropriate.

Business Execution
The Executive & Operating Officers Committee, chaired by
the President and CEO, consists of directors, corporate auditors, executive officers and those responsible for businessexecution at each operation division of the SHI Group. For
the purpose of supervising business execution within theGroup, the status of business execution, matters resolvedby the Board of Directors and important corporate policies
shall be disseminated across the Group, in an effort tofollow up with the management of consolidated businessresults and the implementation of management policies.
The Executive & Operating Officers Committee meets oncea month in principle.

Grou• Sustai• Risk M• Compl

SHI MATERIALITY(number of externalof multiple
external
and utilization
Sumitomo
Heavy Industries
a gover- 20%
20% (SHI) has
20%adopted
20%
22%30% directors
33%
33% of various
directors/directors)
nance system of a company with a board of corporate
discretionary committees, with a view to enhancing
auditors. The system is supported by a dual checking
management transparency and fairness. This structure isfunction based on management supervision by the
believed to be the most appropriate institutional design
Board of Directors’ decision-making over business exfor ensuring an effective supervisory function for SHI
General Meeting of Shareholders
ecution and audits by corporate auditors. The superviwith its highly diversified business domains.
Audit
Selectionis
andCorporate Auditors/
sory function
further reinforcedbytheappointments
Board of Directors
Nomination Committee
Board of Corporate Auditors

BoardManagementof Corporate
Auditors
Strategy Committee

BUSINESS ACTIVITIESComposition of the
Board
Directors
Keyof
Reforms(number of external
directors/directors)• Introduction of a stock purchase remuneration
system for officers

majority of external officers and chaired respectively by an
external director with a view to ensuring objectivity.
President and CEO

CAPITALS

2021

Management Strategy Committee

C
Board

Supervision

Remuneration Committee

At the time of submitting this report, the Board of Directors
is comprised of nine directors (limited to 12 directors). They
include the Chairman of the Board, who chairs the Boardof Directors, and three external directors, who supervise
management from a standpoint independent from thesenior management and whose role is to incorporate theperspectives of external stakeholders into management.
The Board of Directors has introduced an executive officer
system to create an environment that enables prompt andbold business execution. The senior management reports
as appropriate to the Board of Directors on critical management issues and high-risk management challenges, thereby
ensuring effective supervision over the senior managementand directors. The Board of Directors has also appropriately
built up the internal control system and risk management
system, pursuant to the Companies Act and other relevantlaws and regulations, while supervising the operation of
those systems as appropriate by receiving reports from theInternal Control Department on its annual plan and operational status and giving necessary instructions. The Boardof Directors meets once a month in principle. Extraordinary
Board of Directors meetings are held as appropriate.
SHI has also established the Selection and Nomination
Committee and the Remuneration Committee as advisory
bodies to the Board of Directors. Both are composed of a

Audit

(The Sources of Our Strengths)

2020

Board of Directors

SHI WAY

The SHI Group has formulated the Corporate
Governance Basic Policy of Sumitomo Heavy Industries,
Ltd. and is working to enhance and strengthen its
corporate governance in order to establish a highly

Selection and
Nomination Committee

Risk Management

External Directors and External Corporate Auditors

Basic Concept

We have determined that our external directors and external
corporate auditors meet the requirements of the Company’s
Independence Standards for External Officers (contained in
Chapter 5 of the Corporate Governance Basic Policy of Sumitomo

The importance of risk management, including the management of ESG-related risks, is rising year by year with the
expansion of our business scale, the acceleration of globalization, and the increasingly complex nature of social andenvironmental issues. Based on this recognition, the SHI Group is actively working to strengthen its risk management
system and upgrade its risk management processes in order to make optimal management decisions and achieve sustainable growth.

Heavy Industries, Ltd.) and that there is no risk of a conflict ofinterest with general shareholders. We have notified the Tokyo
Stock Exchange of all external directors and external corporate
auditors who are independent officers.

Executive Compensation

Basic Remuneration

Performance-Linked
Remuneration

Stock Purchase
Remuneration

Number of
Eligible Officers

Directors (excluding external directors)

326

207

87

32

7

Corporate auditors (excluding external corporate auditors)

69

69

—

—

2

External officers

48

48

—

—

6

On the advice of the Board of Directors, the Selection and
Nomination Committee deliberates on candidates for directors
and corporate auditors, dismissal of directors and corporate auditors, appointments and dismissal of representative directors anddirectors with managerial positions, as well as progress of the succession plan for the CEO and other top executives, and reports toand advises the Board of Directors. The Selection and Nomination
Committee meets at any time as appropriate. In FY2021, the committee met four times to report on the appointment of representative directors and directors with managerial positions, as well as
the nomination of candidates for directors and corporate auditors,
while advising on the appointment of the candidates for executive
officers and verifying the progress of the succession plan for the
CEO and other top executives.

On the advice of the Board of Directors, the Remuneration
Committee deliberates on the system and standards of compensation of directors and executive officers and related matters, andreports to and advises the Board of Directors. The Remuneration
Committee meets once a year in principle but may meet at any
time as appropriate. In FY2021, the committee met twice to reporton the revision of executive compensation for FY2021 and discussed a desirable executive compensation system for the future.

56 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Supervise

Risk Management Committee
Secretariat (Internal Control Department)

Observe

Internal Audit
Department
Observe

ReportMonitorHead Office / business divisions /subsidiaries and affiliated companies

Audit
Audit by Corporate Auditors

Risk Assessment Process
The Group manages risks by categorizing them intobusiness risks that may arise in the course of businessand operational risks that may arise in the course of thedaily operations of each department.
In addition, the Risk Management Committee has
been established to identify all management-relatedrisks. The Risk Evaluation Subcommittee has been
established under the Risk Management Committee
to perform an assessment of the identified risks for theentire Group. Following this risk assessment, risks thatneed to be addressed are categorized as “significant

Group risks.” Risk reduction measures are implemented
for these risks, which are then followed up on.
Significant Group risks that have been identified andworked on for fiscal 2022 include climate change risks(risksassociatedwith thetransition System)
to a decarbonized
SHI Group
Ethics Hotline(Whistleblowing
economy, the physical risks of increasingly extreme
By phone or written rep
Information
weather events,etc.),flowrisks associated with quality-related misconduct and data tampering, information security
risks, as well as risks associated with large-scale disasExternal
By phone or web
ters, infectious diseases, and serious accidents.
By phoneor e-mailOverview of Risks

Whistleblower in the Group
Telephone counseling: Industrial c(domestic)
Operational risks
Whistleblowers can provide inform

Business risks
Management-level risksGroup governance, Responding
to medium- to long-term management issues [Delays in addressing
climate change and next-generation research and development],
Information disclosure

reportingcontact officeBusiness-level Externalrisks reporting contact office: Professional contractor

through an external reporting con

Internal reporting contact office: Sumitomo Heavy Industries, Ltd.
without the Company’s knowledg
Internal
Control Department Competition
External environment, Sales andWorkenvironment,
Head Office Ethics Hotline Secretariat

services, Research, development
and design, Production, procurement, and logistics, Quality,
Information systems, Human
resources, Management of large
projects, BCP

and trading, Finance and accounting, Business operations, Facilities
and properties, Environmental
management, Community andsocial relations, Internal reporting

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 57

CORPORATE DATA

Remuneration Committee

ReportBoard ofAudit Corporate Auditors

OUTCOME

Selection and Nomination Committee

Board of Directors

SHI MATERIALITY

Amount ofCompensation(¥ million)

The Risk Management Committee, which meets fourtimes a year, is chaired by the President and composed of the Directors in charge of internal control,
finance, technology, and other executive officers of the
Head Office, as well as general managers of related
Headquarters departments. The Risk Management
Committee identifies, analyzes, and evaluates risks froma group-wide perspective, formulates countermeasures,and monitors the status of risk management in eachdivision. The Internal Control Department reports to
the Board of Directors twice a year on the progress of
the Committee’s activities and the monitoring results.
In addition, corporate auditors will also audit the risk
supervision carried out by the Board of Directors froman independent standpoint.

BUSINESS ACTIVITIESAmount by Type of Compensation (¥ million)

Classification

Promotion System

CAPITALS

co-movement between executive compensation and theCompany’s stock value, and it seeks to raise awareness among officers that they can play a role in improving the Company’s performance and increasing its corporate value over the medium to longterm by sharing with shareholders the benefits and risks associated with fluctuations in its stock price. Under this remuneration
system, a trust established by the Company through monetarycontributions will acquire the Company’s shares, and these shares
will be distributed to each officer through the trust (with the number of shares to be distributed equivalent to the number of points
granted to each officer by the Company). The number of points
to be granted to each officer, which serves as the basis for calculating the number of shares to be distributed, shall be within therange of points resolved at the General Meeting of Shareholders
and shall be allocated in accordance with the officer’s position.
Compensation of corporate auditors is determined by mutual
consultation among corporate auditors. Compensation of external officers consists solely of basic remuneration. The maximum
aggregate amount of compensation paid to directors shall not exceed ¥40 million per month, pursuant to the resolution passed at
the General Meeting of Shareholders held in June 2006. Separate
from the maximum amount of monetary remuneration for directors (¥40 million per month), a stock-based remuneration systemwith a maximum aggregate contribution amount of ¥112.5 million
from fiscal 2022 through fiscal 2024 will be introduced, pursuant
to the resolution passed at the General Meeting of Shareholders
held in June 2022. The maximum aggregate amount of compensation paid to corporate auditors shall not exceed ¥10 million permonth, pursuant to the resolution passed at the General Meetingof Shareholders held in June 2022.

(The Sources of Our Strengths)

Compensation for the Company’s directors and executive officers
comprises basic remuneration, performance-linked remuneration,and stock-based remuneration. The approximate component
ratios are 60%, 30%, and 10%, respectively. Basic remuneration
is a fixed form of remuneration determined for each position. An
allowance is added to the remuneration for directors, 85% of which
is fixed remuneration. Performance-linked remuneration comprises
dividend-based remuneration that fluctuates in response to theCompany’s annual dividend, as well as performance-based remuneration that fluctuates in response to the consolidated businessresults for directors and executive officers of the Head Office andto the performance of operation divisions for directors and executive officers in charge of such divisions. The component ratios are
50% and 50%, respectively. The dividend-based remuneration is
calculated by multiplying a standard amount for each position by acoefficient determined based on the Company’s annual dividend.
15% of the directors’ allowance is variable as it is multiplied by thecoefficient used for calculating dividend-based remuneration.
Performance-based remuneration linked to the performance of
operation divisions is calculated by multiplying a standard amountfor each position by a coefficient determined according to theranks A to E based on the three indicators of net sales, amount ofoperating profit, and operating profit ratio, and takes into accountadditional factors such as safety records and compliance status,with the President and CEO as the final decision-maker.
The Company aims to share value with shareholders throughthe use of these indicators, while incorporating perspectives
including profitability, growth potential, financial discipline, safety,
and compliance into executive compensation.
Stock-based remuneration is intended to clarify the

SHI WAY

Corporate GovernanceBoard ofBoard of Directors
ReportCompliance

Supervise

ReportObserve

Risk Management Committee

ReportBoard ofAudit Corporate Auditors

Supervise
Observe

Compliance Committee

Internal Audit
Department

Secretariat (Internal Control Department)

Observe
ReportBy phone or web

Audit by Corporate Auditors

By phoneor e-mail
Whistleblower in the Group(domestic)

To ensureWhistleblower
adequate understanding
and awareness of
As part of our efforts to promote a high level of comin the Group
Telephonecounseling:
Industrial
counselor,pliance, etc.
we require all managers of the SHI Group andcompliance among
employees and identify potential(domestic)
directors of our subsidiaries
to submit
a pledge of comcompliance risks at the workplace, we conduct
an annuAffiliatedCompanies
Whistleblowers
can provide information
External reporting contact office: Professional contractor
throughanmainexternal reporting contact
office once a year.
alcomplianceawarenesssurvey
with
the
aim
of
pliance
EthicsHotlineInternal reporting contact office: Sumitomo Heavy Industries, Ltd.
without the Company’s knowledge
Secretariat
taining and raising
the levelof compliance.
Internal Control
Department
Head Office Ethics Hotline Secretariat

Ethics Hotline
Secretariat

We conduct education and training by level and purpose in order to ensure the thoroughness of the Group’s compliance.
Name of training

Target participants

OutlineLevel-specificeducation

New hires, mid-career hires, newly
appointed assistant managers,
managers, general managers andofficers

Deepen the knowledge of compliance required
for each job level

Upon hiring andpromotions

Deepen the basic understanding of complianceand raise awareness of compliance through theregular reading of the Compliance Manual andregular compliance education at the workplace

Conducted on aregular basis

Raise awareness of compliance through education and training using the case method, inwhich participants are divided into groups todiscuss and present compliance case studies

Once per year

Workplacespecificeducation

Group companies’ employees

Frequency

E-learning

Group companies’ employees

Deepen knowledge of compliance throughtest-based education and training on compliance, safety, harassment, and sustainability

Once per year

Functionspecificeducation

Non-managerial employees insales departments

Gain an understanding of the basics of contracts and sustainability as well as the compliance risks encountered by sales representatives

Upon assignment tosales departments

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 59

CORPORATE DATA

58 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

such as consultants and agents, and the prohibition ofexcessive favors in the form of entertainment and gifts.
It also clearly states that all violations of relevant laws
and regulations or internal regulations will be strictly
dealt with in accordance with the provisions of the internal regulations, etc.

Affiliated Companies

Compliance Education

Anti-bribery Measures
We have established the SHI Group Anti-Bribery Basic
Policy to clarify the anti-bribery rules that all employeesof the SHI Group must comply with in order to prevent
bribery from taking place. This policy contains clauseson the prohibition of bribery (including facilitation payments), the prohibition of bribery through third parties

Whistleblowers can provide information
through an external reporting contact officewithout the Company’s knowledge

OUTCOME

Head Office Ethics
HotlineSecretariat
Obtaining a Pledge of Compliance

Head Office Ethics
Hotline Secretariat

SHI MATERIALITY

We have compiled a Compliance Manual that outlines the rules and specific behavioral
guidelines
that(Whistleblowing
must be observed
SHI Group
Ethics Hotline
System)by all officers and employees of the SHI Group. The
manual has been distributed to employees to raise awareness of the compliance stanBy phone or written report
Information
flowbe strictly adhered to. The Compliance Manual covers a comprehensive
dardsthat mustlist of compliance-related matters, including sections on compliance with antitrust laws,
prohibition of unfair competition, prohibition of bribery, prohibition of harassment, prohi-Internal reporting
External
By phone or web
bition of insider trading, and proper accounting standards.
contact officeInternal reporting
contact office

External
reportingcontact officeTelephone counseling: Industrial counselor, etc.

External reporting contact office: Professional contractor
Internal reporting contact office: Sumitomo Heavy Industries, Ltd.
Internal Control Department
Head Office Ethics Hotline Secretariat

Creation of Compliance Tools

By phone
Compliance Awareness Survey or e-mailBy phone or written report

Audit

Initiatives to Strengthen Compliancereportingcontact office

For the number of violations identified by the Ethics Hotline, please> P75
refer to Non-Financial Information −BUSINESS ACTIVITIESHead Office / business divisions /subsidiaries and affiliated companies

dedicated to handling workplace harassment issues.
ReportMonitorAll reports are investigated and handled by the Head
Audit
Office Ethics Hotline
Secretariat.
Head Office/ business divisions /subsidiaries
andaffiliatedcompanies
The SHI Group Ethics Hotline accepts reports
and
Audit
by Corporate Auditors
consultation requests based on the “SHI Group Ethics
Hotline Regulations” (revised June 1, 2022), which complies with the provisions of the Whistleblower Protection
Act, and also serves to protect whistleblowers by prohibiting all adverse treatment of whistleblowers, including retaliation against them.

SHI Group Ethics Hotline (Whistleblowing System)

Information flow

MonitorObserve

CAPITALSThe SHI Group Ethics Hotline was established as a whisReport
Monitortleblowing system that allows officers and employees of
Audit
the SHIHead
Group
formerOffice(including/ business divisions/ employees who havesubsidiaries
andaffiliatedcompanies
departed the Group in the past one-year
Auditperiod)
by Corporateto
Auditors
report and consult on any violations of laws, regulations,or internal rules, as well as circumstances that may posea risk of such violations. In Japan, we have established
a common external contact point for all Group companies, while in China, our main business base, we haveestablished an external reporting contact office that
can handle reports or consultation requests in Chinese.
In order to maintain a healthy work environment, wehave also established an external consultation service

Internal Audit
Department(The Sources of Our Strengths)

In order for the SHI Group to continue growing sustainably as a global business enterprise in the future, it is essential
for the Group to comply with the laws and regulations of each country, as well as its internal regulations and corporate
ethics. To this end, we have formulated the Basic Compliance Policy and are implementing various initiatives throughout
the Group to ensure compliance.

Board of Directors

Observe

SHI WAY

Establishment of Systems for
Reporting and Consulting
Observe

Boardtwiceof
The Compliance
Committee, which meetsa
Board of Directors
Audit Corporate Auditors
year, is chaired by the President and composed of the
Officers
in charge Supervise
of internal control, finance, technolReportogy, and other executive officers of the Head Office,Observe
as well as general managers of related
Headquareters
Risk Management Committee
departments. The Compliance Committeemonitors
Internal Audit
Department
the occurrenceof Department)compliance violations
and formuSecretariat(Internal Control
Observe and otherlates the necessary preventive measures
measures aimed at preventing the recurrence of violaReport
Monitortions. The Internal Control Department reports to the
Audit progress of theBoard of Directors twice a year on the
Head Office / business divisions /Committee’s
activities
and the monitoring status ofsubsidiaries
and affiliatedcompanies
Audit by Corporate Auditors
compliance violations. This is followed by deliberations
on how the level of compliance can be raised. In addition, corporate auditors will also audit the compliancesupervision carried out by the Board of Directors froman independent standpoint.

Supervise

Secretariat (Internal Control Department)

Basic Concept

Promotion System

Audit Corporate Auditors

Compliance Committee

Internal Audit
Department

Secretariat (Internal Control Department)

Board ofBoard of Directors

Audit Corporate Auditors

Directors, Corporate Auditors, and Executive Officers
Areas of expected expertise and contributions
Name

Reasons for Selection

Corporate
management

ompliance/risk management

ESG/
sustainability

Business strategy/
marketingGlobalTechnology/ IT/
production

Finance/accounting

Board of Directors
Representative Director,
Chairman of the Board

Shinji Shimomura
Representative Director,
President and CEO

Kazuo Hiraoka
Director, Executive Vice President

Toshihiko Chijiiwa

Toshiro Watanabe
Director, Senior Vice President

Susumu Takahashi
External Director
OutsideIndependent

External Director
OutsideIndependent

Akio Hamaji
External Director
OutsideIndependent

Mr. Toshihiko Chijiiwa has contributed to technology development in the Company over a long period of time, having held positions in the technology
division that included appointments as General Manager of the Technology Research Center in 2014 and as General Manager of the Corporate Technology
Management Group in 2020. After being appointed as Vice President in 2017, he was promoted to Senior Vice President in 2020 and Executive Vice President in April 2022. As the head of the technology division, he has led the Company Group’s research and development with his wide-ranging and in-depth
technological knowledge and yielded results. In view of his excellent knowledge of various technologies that constitute the Company Group’s foundation andhis management-related supervising ability, the Company has determined that he is qualified to serve as a Director of the Company.
Mr. Toshiro Watanabe has held key positions in the finance and accounting division. After being appointed as General Manager of Corporate Finance,
Accounting & Administration Group in 2019, he was appointed as Vice President in 2020 and promoted to Senior Vice President in April 2022. As the headof the finance and accounting division, he has promoted initiatives to enhance the profits of the Company Group by utilizing his extensive knowledge andexperience in finance, accounting, and other areas. In view of his excellent management knowledge and supervising ability, the Company has determinedthat he is qualified to serve as a Director of the Company.

Mr. Susumu Takahashi possesses a high level of insight in economic and management matters, along with broad-based practical experience at both private
corporations and government organizations. The Company therefore expects him, as an external director, to offer useful advice for the promotion of sustainable growth and enhancement of corporate value and to supervise the management of the Company from an objective and independent standpoint.

SHI MATERIALITY

Hideo Kojima

After being appointed as General Manager of the Plastic Machinery Division in 2012, Mr. Kazuo Hiraoka was appointed as Vice President in 2015, as SeniorVice President in 2016, and as Director and Executive Vice President in 2020. From April 2021, he has promoted initiatives aimed at business growth as thehead of the Precision Equipment Group, a driver of growth and profitability in the Company Group. In view of his excellent management knowledge andsupervising ability, the Company has determined that he is qualified to serve as a Director of the Company.

BUSINESS ACTIVITIES

Director, Executive Vice President

After being appointed as General Manager of the Mechatronics Division in 2013, Mr. Eiji Kojima has fulfilled his responsibilities as the head of driving control
technologies by leading this business across the Company Group. In 2016, he was appointed as a Senior Vice President, and in the same year, as General
Manager of the Energy & Environment Group. He has advanced initiatives to strengthen our business competitiveness and build competitive advantage. In
2017, he was appointed as a Director. With his promotion to Executive Vice President in April 2021, he has taken the lead in the formulation and promotionof strategies for the entire Company Group as the head of the Corporate Planning Group. In April 2022, he was appointed as a Representative Director andhas been responsible for the management of the Company Group. In view of his excellent management knowledge and supervising ability, the Company
has determined that he is qualified to serve as a Director of the Company.

CAPITALS

Representative Director,
Executive Vice President

As Representative Director and President & CEO of Sumitomo (S.H.I.) Construction Machinery, Mr. Shinji Shimomura accomplished high business growthin the Construction Machinery segment with his strong leadership and was responsible for the management of the Company Group. He was appointed as
Representative Director and President & CEO of the Company in 2019, and he has promoted reforms aimed at the creation of greater corporate value and theestablishment of a robust business structure, demonstrating leadership in the management of the Company Group as CEO. In view of his excellent management knowledge and supervising ability, the Company has determined that he is qualified to serve as a Director of the Company.
(The Sources of Our Strengths)

Eiji Kojima

Mr. Tetsuya Okamura was appointed as a Senior Vice President of the Company in 2012, and he has contributed to strengthening the competitiveness of ourplastic machinery business. After his appointment as General Manager of the Industrial Equipment Division in 2017, he was appointed as a Director and Executive
Vice President in 2018. He has advanced initiatives to stabilize earnings and enhance the strengths of products in this business segment. He was appointed as
Representative Director, Senior Executive Vice President in April 2020 and CIO in April 2021. Since being appointed as Representative Director and Chairman of
the Board in April 2022, he has encouraged the enhancement of governance systems and has been responsible for the management of the Company Group as
Chairperson of the Board of Directors. In view of his excellent management knowledge and supervising ability, the Company has determined that he is qualified
to serve as a Director of the Company.

SHI WAY

Tetsuya Okamura

Mr. Hideo Kojima is an expert in finance and accounting with many years of practical experience as a certified public accountant. The Company therefore
expects him, as an external director, to offer useful advice for the promotion of sustainable growth and enhancement of corporate value and to supervise themanagement of the Company from an objective and independent standpoint based on his abundant experience and outstanding insight.

As a former Representative Director involved in the management of the Company, Mr. Akio Hamaji possesses abundant experience and outstanding insightbased on his many years as a corporate manager. In view of his expertise in corporate management, the Company expects him, as an external director, tooffer useful advice for the promotion of sustainable growth and enhancement of corporate value and to supervise the management of the Company froman objective and independent standpoint.

Corporate Auditors

Corporate Auditor

Jun Nogusa
Corporate Auditor

Masaichi Nakamura
OutsideIndependent

Yaeko Hodaka
External Corporate Auditor
OutsideIndependent

After being appointed as General Manager of the Internal Control Group in 2014 following his tenure as the head of the planning and control in businessdivision, Mr. Jun Nogusa has been working to promote the establishment of internal control systems and compliance initiatives for the Company Group. In
view of his broad knowledge and extensive experience in the planning and control in business division and the Internal Control Group, the Company has
determined that he is capable of working with other Corporate Auditors to fulfill his responsibilities as a Corporate Auditor.

Masaichi Nakamura is an expert in finance and accounting with many years of practical experience as a certified public accountant and was committed to corporate management as a representative director in the past. The Company therefore expects him to conduct effective audits of the Company’s management
based on his abundant experience and high level of insight.

CORPORATE DATA

External Corporate Auditor

After being appointed as General Manager of the Corporate Finance, Accounting & Administration Group in 2012, Mr. Hideo Suzuki was appointed as SeniorVice President in 2014 and as Director and Executive Vice President in 2018. As CFO since 2019, he has been working to manage the Company Group’s
operating performance and maintain financial discipline in the Company’s investment activities targeting growth. In view of his excellent management
knowledge and extensive experience, the Company has determined that he is capable of working with other Corporate Auditors to fulfill his responsibilities
as a Corporate Auditor.

OUTCOME

Hideo Suzuki

Yaeko Hodaka is well versed in the law and has extensive experience and knowledge, especially in corporate legal affairs, as a lawyer. The Company therefore
expects her to conduct effective audits of the Company’s management from an objective and independent standpoint as an external corporate auditor, basedon her abundant experience and outstanding insight.

Please refer to the Company’s website for the profiles of our directors and corporate auditors. https://www.shi.co.jp/english/company/officer/index.html

60 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 61

Roundtable Discussion with External Directors

Composition of each committee in 2022

One year has passed since the Sumitomo Heavy Industries Group launched its Medium-Term Management Plan 2023
(MTMP23). The Group’s three external directors sat down to reflect on the past year and discuss the progress being
made on the basic policies for MTMP23, namely realizing a sustainable SHI Group and contributing to society throughthe promotion of CSV, as well as the nature of the remaining challenges.

Selection andManagement
Executive &Risk
Remuneration
Sustainability
Nomination
Strategy
OperatingManagement
Committee
Committee
Committee
Committee Officers Meeting
Committee

Compliance
Committee

Attendance at Meetings of the Board of Directors/
Board of Corporate Auditors

Tetsuya Okamura

Representative Director,
Chairman of the Board

4

Meetings of the Board of Directors: 14/14 (100%)

Shinji Shimomura

Representative Director,
President and CEO

6

Meetings of the Board of Directors: 14/14 (100%)

Eiji Kojima

Representative Director

5

Meetings of the Board of Directors: 14/14 (100%)

Kazuo Hiraoka

Director

2

Meetings of the Board of Directors: 14/14 (100%)

Toshihiko Chijiiwa

Director

New
Candidate—* Appointed in Jun. 2022

Toshiro Watanabe

Director

New
Candidate—* Appointed in Jun. 2022

Susumu Takahashi

External Director

8

Meetings of the Board of Directors: 13/14 (93%)

Hideo Kojima

External Director

7

Meetings of the Board of Directors: 14/14 (100%)

Akio Hamaji

External Director

2

Meetings of the Board of Directors: 14/14 (100%)

Hideo Suzuki

Standing Corporate
AuditorMeetings of the Board of Directors: 14/14 (100%)* Appointed in Jun. 2022

Jun Nogusa

Standing Corporate
AuditorMeetings of the Board of Directors: 14/14 (100%)
Meetings of the Board of Corporate Auditors: 12/12 (100%)External Corporate

Meetings of the Board of Directors: 12/14 (86%)
Meetings of the Board of Corporate Auditors: 12/12 (100%)

Masaichi Nakamura Auditor: Chairperson

Meetings of the Board of Directors: 10/10 (100%)
Meetings of the Board of Corporate Auditors: 8/8 (100%)* Appointed in Jun. 2022

External Corporate
AuditorYaeko Hodaka(Conducted on June 29, 2022 at the Head Office conference room)

Hideo Kojima

Susumu Takahashi

Akio Hamaji

External Director

External Director

External Director: Committee member

Executive Officers (designates concurrent position as a director)

President

Shinji Shimomura

CEO

Executive Vice President

Toshiharu Tanaka

Assisting CEO to accelerate business globalization

Executive Vice President

Kazuo Hiraoka

General Manager of Precision Equipment Group

Executive Vice President

Tatsuya Endo

Chairman of Sumitomo Construction Machinery Sales Co., Ltd.; General Manager of Ehime Works

Executive Vice President

Taiji Tsuchiya

General Manager of Power Transmission & Controls Group

Executive Vice President

Eiji Kojima

General Manager of Export Administration Department; General Manager of Corporate Planning Group

Executive Vice President

Toshihiko Chijiiwa

General Manager of Corporate Technology Management Group

Senior Vice President

Hiroo Morita

In charge of Internal Control Group, Corporate Legal Department, Internal Audit Department and General Administration Group;
Regional General Manager of Kansai Office; Chairman of Sumitomo Heavy Industries (China), Ltd.;

Senior Vice President

Morihiro Kondo

General Manager of Plastics Machinery Division

Senior Vice President

Yasunobu Kazumi

Representative Director, President & CEO of Sumitomo Construction Machinery Co., Ltd.
Representative Director, President & CEO of Sumitomo Construction Machinery Sales Co., Ltd.

Senior Vice President

Shaun Dean

General Manager of EMEIA HQ, Power Transmission & Controls Group,
Lafert S.p.A. Director & CEO, Invertek Drives Ltd. Director & CEO

Senior Vice President

Tatsuro Araki

General Manager of Production Management Business Division, Power Transmission & Controls Group,
President & CEO of Sumitomo Heavy Industries Gearbox Co., Ltd.

Senior Vice President

Toshiro Watanabe

General Manager of Corporate Finance, Accounting & Administration Group

Vice President

Shigeru Tajima

General Manager of Process Machinery Center; Representative Director & President of Sumitomo Heavy Industries Process
Equipment Co., Ltd.

Vice President

Kazutoshi Shiraishi

General Manager of Human Resources Group

Vice President

Mitsukuni Tsukihara

Representative Director, President & CEO of Sumitomo Heavy Industries Ion Technology Co., Ltd.

Vice President

Takanori Nagai

Representative Director, President & CEO of Sumitomo Heavy Industries Environment Co., Ltd.

Vice President

Haruhiko Tsuzuki

Representative Director, President & CEO of Sumitomo Heavy Industries Material Handling Systems Co., Ltd.

Vice President

Melvin Porter

LBCE Holdings, Inc. President & CEO

62 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Our Role as External Directors
Takahashi I believe that our role as external directors
is to work together with the management team to makethe Group as a whole aware of the necessity and significance of enhancing social value and to contribute tobuilding the capacity to realize this goal.
At the same time, in addition to conducting regularself-checks to ensure that the Board of Directors isfunctioning effectively, we’re also required to listen to
stakeholder evaluations of management and improve
the quality of management. For this reason, I thinkit’s necessary to enhance information disclosure andstrengthen efforts to convey the actual state of management to stakeholders. Currently, our PBR is below
1x. This should be taken as a sign that not only is theCompany’s communication weak, but also that it’s being subjected to the harsh scrutiny of its stakeholders,and as an external director, I am acutely aware of myown responsibility.
Hamaji In the past, external directors have been
expected to perform an advisory function at meetingsof the Board of Directors and a supervisory function
in governance and other areas. In recent years, I feelthat we’re being called upon by shareholders, in ourcapacity as their representatives, to make more active
contributions by leveraging our expertise to improve
corporate value. I would like to take advantage of myexperience in managing a conglomerate to promote
the development of social value through the synergy of
SHI’s diverse businesses.
Takahashi Companies like SHI that cut across many
segments are susceptible to the so-called “conglomerate discount,” which refers to a market valuation below
what the businesses would receive on a standalone basis. To prevent this from happening, I think it’s important
to encourage specific initiatives to maximize synergies
between segments and extract the benefits a conglomerate can offer. I also feel that it’s the responsibilityof the Board of Directors to strive to build a businessportfolio that is optimal for a conglomerate.
Kojima As is the trend these days, we are expected
to enhance both social value and corporate value. In
contemplating our role as external directors, we should
think about what it means to improve social value in thecurrent situation.
Increasing social value means improving daily life andSumitomo Heavy Industries, Ltd. / Integrated Report 2022 63

CORPORATE DATA

Appointments

OUTCOMEName

SHI MATERIALITY

Title

BUSINESS ACTIVITIES

Tenure(Years)CAPITALS

Current position(The Sources of Our Strengths)

Name

SHI WAY

Directors, Corporate Auditors, and Executive Officers

through our many businesses and the products we offer.
For this reason, I see my role as an external directorof SHI as to monitor vigilantly whether the company isrealizing increased corporate and social value throughits business activities, and to provide advice on how to
improve that value.

64 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

Takahashi Among the targeted development areas,
the DX and Automation themes are recognized ascompany-wide initiatives essential for increasing corporate value. These initiatives have already been implemented structurally and achieved results, but we needto speed them up further.
Hamaji I keep an eye on developments in the energy
sector. We’re working to develop the first commercial
Liquefied Air Energy Storage System (LAES) in Japan.
We aim to build an operational model of the plant,

which is based on technology developed by Highview
Enterprise in the UK, as an energy storage system forthe grid that is suited to the Japanese electricity market.
This is an initiative that unites the business divisions,investees, and our R&D divisions in a triangular link. If
this system can be commercialized, the effective use ofelectric power, including renewable energy, will advancequickly. We have high expectations for this initiative
to make full use of the management resources andstrengths that we have acquired through M&A.

Initiatives Related to DX
At the same time, it’s also true that the speed of ouractual efforts has not increased sufficiently. To speed
up the process, it’s important to strengthen our muscles
as a company. Specifically, I feel that we need to further

Takahashi The importance of DX initiatives is becoming increasingly recognized, and the foundation for theuse of DX in business operations, such as the use of
AI in R&D and after-sales service businesses, is being

established. In order to build the capacity to make themost of DX in all aspects of the provision, maintenance,
improvement, development, and organizational management of products and services, we need to deploy

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 65

CORPORATE DATA

Takahashi We created MTMP23 by “backcasting” froma long-term perspective. By doing so, we were able
to clarify where we stood and what we needed to do,which I think gave us the necessary sense of urgency.

Kojima As our targeted development areas, we set
the four themes of Environment, Energy, Automation,
and Digitalization. In the last fiscal year, which was thefirst year of MTMP23, the main task was to select development targets by “backcasting.” However, to achievesome degree of success over the next two years or by
the next medium-term management plan, we need to
speed up the weighting of development targets, the development budget, and the priority allocation of humanresources.

OUTCOME

Speed of Corporate Reforms

Status of Progress in Targeted Development Areas

SHI MATERIALITY

Kojima My understanding is that MTMP23 was formulated with a longer-term perspective than the previous
medium-term management plan. From that point ofview, the most tangible progress was the establishmentof the new segments as part of a review of our businessportfolio. I consider it a very good thing that we haveconsolidated our existing divisions and subsidiaries into
four segments with the goal of managing our portfolio
at a larger business group level. However, issues remain
regarding the management and development policiesof the new organization and the utilization of humanresources. First and foremost, I believe we need to sortout the scope of authority and responsibility of thesegment headquarters and their leaders. I hope to see
further progress on this in the remaining two years.

Hamaji What should we tackle with a sense of urgency? One major theme is the improvement of ROIC,
which is a management issue. With regard to ROIC,
although company-wide management standards havebeen established, when it comes to clearly stating theissues to be addressed by each business unit and setting appropriate KPIs, progress has been mixed depending on the business unit, and overall progress has
not been monitored by the Board of Directors. I’d like to
see us develop these KPIs with a sense of urgency.

BUSINESS ACTIVITIESTakahashi In fiscal 2021, despite being at the mercyof various structural changes taking place worldwide,

we were able to achieve a certain degree of success interms of business performance, thanks to factors suchas the progress of DX worldwide.
In MTMP23 we used the “backcasting” method to lay
the foundation for our long-term goals. I think that going forward, in addition to the need for KPIs that specifically evaluate the progress made towards achieving thegoals, the challenge will be to promote management
reform so that the medium-term targets, which are extrapolated from the business conditions in a single fiscal
year, are consistent with the medium-term vision drawn
from the long-term targets.

Kojima I agree that we need to speed things up evenmore than we’re doing now. At last year’s roundtablediscussion, I noted that we’re steadily implementing
measures to demonstrate resilience, but we need tostrengthen our responsiveness to agility.
If we look at the situation in fiscal 2021, we can saythat we’ve fully demonstrated our resilience. However,when it comes to agility – that is, the speed of transformation in new segments, the establishment of a system
to strengthen governance, and business selection and

CAPITALS

Hamaji In fiscal 2021, the first year of MTMP23, ourbusiness results exceeded the plan thanks in part torebound demand from the COVID-19 crisis in Europe
and the United States. Furthermore, the results ofprevious M&A and capital investments made in anticipation of changes in the external environment have led
to an increase in orders in the current fiscal year, so myassessment is that we’re getting closer to the vision we
have set forth.
When we were formulating MTMP23, I recommended
strengthening intangible assets, especially development
capabilities. The executive side agrees strongly withmy assessment, and we continue to invest in development at a higher level than in the past. Meanwhile, thesemiconductor industry is characterized by advanced
technology development by giant manufacturers anddiscontinuous ultra-large-scale investments. To survive,
we must not be limited by the mind-set of a machinery
manufacturer; we need to strengthen our development
capabilities to a level comparable to industry standards
and make timely and concentrated investments. In the
future, it will be essential to allocate management resources according to the attributes of each business andmake decisions quickly, and the management team will
be required to have a more multifaceted management
mindset than in the past.

concentration – I’d like to see action taken with a greater sense of urgency.

(The Sources of Our Strengths)

Assessment of MTMP23

strengthen our intellectual and human capital capabilities, as well as our organizational capabilities.

SHI WAY

contributing to sustainable development as a society. In
order to achieve this goal, it’s important to understandhow companies can contribute to the creation of a sustainable society through their activities. In the case of
SHI, we have the potential to contribute, or have alreadycontributed, to the creation of a sustainable society

Hamaji One of our society-themed Basic Policies is“Transforming into a company with a comfortable work

66 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

environment,” and my assessment is that this initiativeis progressing steadily. With Japan’s declining birthrate
and aging population, expanding opportunities for

Regarding the Qualifications of New Directors
Takahashi Our business is diversified, and I believe it’s
essential for the Board of Directors to include members
who are familiar with our major business segments.
Based on this premise, when it comes to new directors,
I’d like to appoint people who not only have skills intheir own field of expertise, but also a broad range ofknowledge and management skills, including in otherfields. To this end, we need to pay attention to mid-level
employees and above in the Company and implement
training and staffing in a way that makes it possible tocombine expertise and versatility.

Hamaji The revision of the compensation plan has
increased the alignment of the asset value of the compensation consideration with the long-term increase incorporate value and stock price. I applaud these efforts
to improve our system for incorporating incentives forrising stock prices into executive compensation. To
provide further incentive for sustainable growth and increased corporate value in the future, I think we should
consider increasing the ratio of the share price-linked
portion of compensation.
Takahashi These institutional reforms, including the
introduction of a stock-based compensation system,
were implemented after extensive discussions. I thinkit’s too early to judge the results of the new system. My
present view is that we should ascertain the results of
the reforms as we proceed with further consideration of
how the incentives should be structured.

Kojima Even for internal directors and executive
officers, different skill sets are required for executive
and non-executive roles, and similarly for internal andexternal roles. It’s important to have executives among
our internal directors who are highly specialized in eachbusiness and have experience in business management.
For the non-executive roles, knowledge of portfolio
management of the Company as a whole and deep
insight into Group governance are required. Moreover,for external directors, it’s desirable to have specialized
knowledge of company management, economic analysis, international experience, finance, accounting, andlegal affairs.

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 67

CORPORATE DATA

Initiatives Related to Society (S)Kojima In terms of corporate governance, “nomination” and “compensation” are the most important
themes. From this perspective, I understand that designing a system for compensation incentives should
be considered as one way to increase the motivation of
executive officers and other employees.
The system adopted by many companies is the introduction of a stock-based compensation system andan increase in the ratio of stock compensation to totalcompensation. In the case of SHI, we introduced a new
stock-based compensation system this fiscal year, but
further study is needed to determine how contribution
points should be awarded to each director and to what
extent stock-based compensation should be increased
as a percentage of total compensation. In the case of
SHI in particular, each division and segment contributes
differently to business performance, and the challenge
is how to evaluate them in light of these differences.

OUTCOME

Hamaji I believe we’ve made great strides in addressing global warming and TCFD over the past year. Goingforward, I hope to see progress in creating specificscenarios and implementing them in business to realize
our goals.

Executive Compensation System

SHI MATERIALITY

Kojima Our response to climate change in terms of
reducing negative environmental impact, especially withregard to CO2 reduction, includes not only direct reductions under Scope 1 and 2, but also indirect reductions
by other companies using our products under Scope3, which is much greater. I therefore think we need tomake an effort to provide our stakeholders with a moredetailed understanding of the current status of our contribution to reductions, including under Scope 3.

Takahashi In terms of our role in society, achieving
diversity is an important theme for any company. In thisregard, in addition to the urgent task of achieving diversity on the Board of Directors, I believe it’s necessary
to advance efforts to strengthen human capital, further
enhance our response to human rights risks, and appropriately disclose such initiatives.

BUSINESS ACTIVITIESTakahashi As a company with business segments
related to the environment and energy, addressing
climate change and sustainability are material issues forus, more so than for other companies. At the same time,they also represent a business opportunity.
Our efforts in these areas are centered on responding
to climate change, taking on the challenge of a circular
economy, and improving energy efficiency. In particular,
now that we have clearly stated our policy on climatechange, we’re at the stage where we can proceed withmeasures in line with that policy and link them to concrete results in product development, market creation,and other areas.

I believe that taking on the challenge of the circular
economy is an area that can be expected to becomea growth business in the future, just like responding toclimate change. We’re promoting commercializationin this area to solve social issues through water treatment, resource recycling, and efficient use of energy.
In the future, however, we will be faced with the question of how to create a long-term story of value creation, not just short-term businesses centered on ourareas of expertise.

I’d like to see further enhancement of this system.

CAPITALS

Initiatives Related to the Environment (E)Hamaji Efforts to utilize DX in our business are steadily progressing. For example, a few years ago, in one
business division that manufactures one-item madeto-order products, where it’s difficult to find potential
customers to boost sales, a team of women introduced
a Marketing Automation (MA) system which has reportedly contributed to an increase in orders. In the future,when a particular department has a success story or
acquires empirical knowledge, we should take measures
to turn this into best practice and explicit knowledge on
a company-wide basis to improve corporate value.

women is an important social issue, and our data at SHI
show increases in the number of male employees taking
childcare leave and the number of female managers.
Also, we were forced to introduce remote work due tothe COVID-19 pandemic, but now preparations are underway to introduce a permanent system to transform
into a company with a comfortable work environment,
rather than limiting this to a temporary anti-COVID measure. Since the presence of excellent human resources isan essential intangible asset for the Company’s growth,(The Sources of Our Strengths)

Kojima From what I’ve seen, the diversification of ourbusiness and its globalization through recent M&As in
Europe and the United States have made the advancement of DX more difficult than originally planned. The
global COVID-19 pandemic has also contributed tothis. DX initiatives are becoming increasingly important,especially in the global deployment of systems for sales
strategy, production management including supply

chain development, and inventory control, and I hope to
see further progress in this area.

SHI WAY

digital-related infrastructure and create systems todevelop and educate our human resources. We havealready made considerable progress in developing thiscapacity, and the results are beginning to show, but I
would like us to speed up the process a bit.

In addition to this, I would also like to see speedy
action on the appointment of female and non-Japanese
directors, which is necessary to achieve diversity on the
Board of Directors.
Takahashi I agree with you. Board diversity is now anurgent issue, but it’s also important to promote diversity
throughout the Group. I think we need to move forward
more aggressively than ever before to recruit, train, andpromote women and foreign nationals and to treat themwith respect.

Hamaji When it comes to finding the right people
for the challenges we need to address, if we want toachieve sustainable growth and increased corporate
value in the future, we need people who are capable ofdeveloping breakthrough products and services and at
the same time revamping our business portfolio, which
are the essential tasks at hand.
I believe that new directors, whether external or internal, need knowledge of global environmental changes
and new technological trends, as well as practical experience and knowledge of business restructuring.

How to Proceed with Information Disclosure

Hamaji Although we have a diverse range of businesses, most of them, including our core businesses,
are not significantly larger than those of our industry
peers. What investors want to know is, in what productareas do we have a competitive advantage, and how do
we intend to achieve sustainable growth in the future,despite our inferiority in size?
To gain the trust of shareholders and other stakeholders, I think it’s important to clearly state the strategy foreach business and to use KPIs to monitor and disclose
the appropriateness of the strategies. In addition to
improving disclosure on our website, I think we need totake steps such as holding more frequent briefings forinvestors, especially domestic and foreign institutional
investors, and organizing factory tours.
Takahashi It’s becoming common knowledge that theaccumulation of intangible assets, such as intellectual
capital and human capital, is necessary for sustained

68 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

enhancement of corporate value. For this reason, it’s
important to steadily accumulate intangible assets froma medium-term perspective. On the other hand, these
intangible assets are difficult to see from the outsideand difficult to evaluate.
I have the impression that Japanese companies are
generally weak in their ability to communicate with theoutside world, and I feel that we do not communicate
enough about our intangible assets, which are difficult to characterize. In the future, it will be even more
important to convey this information to stakeholders
through integrated reports and other means, and to further strengthen information dissemination and dialogue.
Kojima The first thing we need to recognize when
thinking about information disclosure the fact that our
PBR is below 1x. Our intangible assets in particular are
not highly evaluated. Improving disclosure alone may
not be enough to solve this problem, but until now,
I have the impression that even that effort has been
insufficient.
Going forward, first and foremost, we need to improve disclosure, and in particular, to actively disclose
intellectual property, the value of which is difficult toassess, unless it’s strategically confidential. In addition,
to demonstrate that we have a long-term perspective, in
explaining our long-term strategy up to 2030, we should
disclose as much as possible about important intellectual property and development projects that contribute to
the expansion of our business and increase our corporate value.

OUTCOMEThe SHI Group seeks to enhance both social value and corporate value by tackling social
issues through its business activities. In addition, our Group is working to further expand
the scope of disclosure of our financial and non-financial information in order to provide
stakeholders with a better understanding of our Group’s business conditions as well as the
progress and outcomes of our Group’s activities.

CAPITALSSTRENGTH

BUSINESSACTIVITIES(The Sources of
Our Strengths)

Manufacturing
CapitalIntellectual
CapitalFinancial
CapitalHuman
CapitalAdvanced
technologicalcapabilities andcollective strengths
that contribute to
the sustainable
development ofsociety

Superior
management
capabilities thatcreate social
value andcorporate value

A corporate
culture ofalwaysembracing newchallenges

Reduceenvironmental
burdenOptimization of
products toconserve energy
and resources

Ensurehighproduct
quality

Industrial
Machinery

Energy&Lifelines

OUTCOME

Priority issues
for value creation

Createbetterways to live
and work

Logistics&
Construction

SocialCapitalNaturalCapitalMechatronics

OUTPUTSHI
MATERIALITY

Prioritize
employee safety,
health, anddevelopment

Automation of
products tosave manpower

Contribute toaction against
climate change andthe creation of arecycling-oriented
societyEnhance laborproductivity
and safety
for clients

Creationof sharedvalue

Emphasize
coexistence
and co-prosperity
with local
communities

Applicationof advanced
technologies(beam control,
cryogenics, vacuum
technology,etc.)Strengthen
governance

Enhance
information
disclosure

Foster well-being
and improve
quality of life

Priority issues for strengthening
our business foundation

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 69

Eleven-Year Summary and Key Financial Data
Sumitomo Heavy Industries, Ltd. and Consolidated Subsidiaries(unit: million yen)

FY

2012

2013

2014

2015

2016

2017

2018

2019

2020

¥ 624,100¥ 585,871¥ 615,271¥ 667,099¥ 700,838¥ 674,328¥ 791,025¥ 903,051¥ 864,490

2021

Summary of Income (for the financial year):Net sales¥

849,065¥

943,979

R&D expenses

9,343

9,835

10,718

11,415

12,29911,276

14,805

16,83618,753

19,434

20,143Operating profit

47,13531,28834,32945,99850,56848,431

69,92175,24456,806

51,342

65,67864,95549,57052,94662,27970,28968,742

92,925

101,219

84,75881,08996,609Ordinary profit

44,61930,99733,00045,11349,131

48,274

67,466

72,62352,64249,54464,847

Profit attributable to owners of parent

19,492

5,865

17,891

24,34833,13333,613

34,66045,65032,807

26,76444,053

Cash flows from operating activities¥

Cash flows from investing activities

23,309¥(22,672)

Free cash flows*2

2,660

¥

63,661(19,660)(27,622)¥62,170¥(14,112)18,315¥(15,350)

38,158¥(25,852)

71,111¥(37,810)

55,173¥36,263¥64,131(54,973)(57,752)(43,729)¥

61,679(49,678)(17,000)

36,03948,0582,965

12,30633,301

199(21,489)

20,402

12,00019,879(11,428)(9,498)(36,889)(23,789)(17,809)(10,146)(13,314)35,964(7,959)(28,106)

Cash and cash equivalents at the end of the period

72,376

46,47676,41890,324

68,62561,01785,503

69,776

83,63096,242

84,992¥ 691,841¥ 647,724¥ 724,182¥ 786,027¥ 782,859¥ 796,484¥ 894,835¥ 954,051¥ 996,111¥ 1,030,684¥ 1,094,930

96,522

98,547

107,433

83,644

68,23260,46064,181

73,311

124,669

124,439

111,251

Financial Position (at financial year-end):
Total assets
Interest-bearing debt
Net interest-bearing debt*

3

Total net assets

23,14950,732

29,607(8,779)(2,572)(3,360)(24,052)(278)

37,602

24,921

22,468282,145

292,826

331,059

365,101

382,817409,171444,964

465,001

477,648504,928

566,843

Amounts per Share of Common Stock: (unit: yen) *4
Earnings*5

¥

31.75

¥

9.56

¥

29.17

¥

39.71

¥

54.06

¥

54.85

¥

282.83¥372.56¥267.77¥218.46¥

BUSINESS ACTIVITIES

638

Cash flows from financing activities

CAPITALS

Cash Flows (for the financial year):(The Sources of Our Strengths)

EBITDA*1

SHI WAY2011

359.61454.43470.69532.28587.37614.51650.473,517.33

3,701.01

3,790.99

4,005.43

4,501.11

Cash dividends

10.00

8.00

7.00

12.00

16.00

16.00

85.00

112.00

91.00

65.00

115.00Operating profit ratio

7.6

5.3

5.6

6.9

7.2

7.2

8.8

8.3

6.6

6.0

7.0

EBITDA ratio

10.4

8.5

8.6

9.3

10.0

10.2

11.7

11.2

9.8

9.6

10.2

Financial Indexes: (unit: %)R&D expenses ratio to net sales

1.5

1.7

1.7

1.7

1.8

1.7

1.9

1.9

2.2

2.3

2.1

Return on assets (ROA)

3.0

0.9

2.5

3.1

4.2

4.2

3.9

4.8

3.3

2.6

4.0

7.1

2.1

5.8

7.1

9.0

8.7

8.4

10.3

7.1

5.6

8.5

40.3

44.6

45.1

45.8

48.1

50.0

48.2

47.5

46.6

47.6

50.4

Interest-bearing debt ratio

14.0

15.2

14.8

10.6

8.7

7.6

7.2

7.7

12.5

12.1

10.2

D/E ratio (times)

0.3

0.3

0.3

0.2

0.2

0.2

0.1

0.2

0.3

0.3

0.2

ROIC*6

7.4

4.9

4.8

6.5

7.6

7.3

10.3

10.5

7.3

6.1

7.3

OUTCOME

Return on equity (ROE)
Stockholders’ equity ratio

SHI MATERIALITY

Net assets

Investment in Plant and Equipment and Others:
Capital expenditures*7
Depreciation¥

19,682
17,820¥29,88818,282¥

20,32918,617¥

20,67016,281¥

23,721
19,720¥27,53920,311¥30,432
23,003¥33,71325,975¥39,43527,953¥39,88529,746¥

46,72930,93070 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

CORPORATE DATA

*1. EBITDA (Earnings before Interest, Taxes, Depreciation) = Operating profit + Depreciation*2. Free cash flows = Cash flows from operating activities + Cash flows from investing activities*3. Net interest-bearing debt = Interest-bearing debt – (Cash and deposits + Securities)*4.	The Company carried out a 5-to-1 reverse stock split for its common stock with an effective date of October 1, 2017. Amounts per share of common stock was calculated, under the assumption that such share consolidation was conducted at the beginning of FY2017.
*5. Earnings per share of common stock are based on the weighted average number of shares outstanding in each year.
*E ffective tax rate = 45% until FY2013, 40% for FY2014,(Operating profit + Interest and dividend income) x (1 – Effective tax rate*)*6. ROIC (Return on invested capital) =35% for FY2015 and FY2016, 31% from FY2017
		(FY average of stockholders’ equity + FY average of interest-bearing debt)*7. Capital expenditures are capitalized and recorded as assets.

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 71

Non-Financial Key Data
Environment

Water Resources Preservation
Unit

Addressing Climate Change

GHG Emissions (Scope 2)
GHG Emissions (Scope 1, 2 total)

2018

2019

2020

2021

Total

t-CO2

36,252.29

38,703.92

41,053.73

37,761.82

38,669.69

Data Coverage

%

81.2

80.1

85.9

85.9

92.6

Total*1t-CO2

138,160.29

151,293.46

153,767.88

148,157.62

156,931.05

Data Coverage

%

81.2

80.1

85.9

85.9

92.6

Total*1t-CO2

174,412.59

189,997.38

194,821.61

185,919.44

195,600.74

Data Coverage

%

81.2

80.1

85.9

85.9

92.6

t-CO2

313,671

312,242

313,670

356,805351,365

t-CO2—

143,234

165,751

128,805

154,343

Cat-03 Energy Usage

t-CO2

—

9,949

20,162

20,28021,349Cat-04 Logistics (upstream)

t-CO2

11,428

11,984

11,562

11,046

11,082Cat-05 Waste Treatment

t-CO2

8,405

8,679

6,958

5,767

5,578

Cat-06 Business Trips

t-CO2

—

1,962

2,120

2,171

3,761

t-CO2

—

5,723

6,006

6,179

11,138

t-CO2

0

0

0

0

0

Cat-09 Logistics (downstream)

t-CO2

0

0

0

0

0

Cat-10 Processing of
Products to Be Sold

t-CO2

0

0

0

0

0

Cat-11 Use of Sold Products

t-CO

2

—

—

225,549,245

123,029,056

136,614,107

Cat-12 Disposal of Unsold Products

t-CO2

0

0

0

0

0

Cat-13 Lease asset (downstream)

t-CO2

0

0

0

0

0

Total

t-CO2

333,504

493,773

226,075,475

123,560,109

137,172,723

Data Coverage

%

68.9

91.5

97.9

96.8

96.5

Results¥ million/
t-CO2

4.93

5.14

4.69

4.80

5.05

Data Coverage

%

81.2

80.1

85.9

85.9

92.6

Fuel Consumption

MWh185,438.34

198,417.57

211,819.50

195,697.93

199,485.64

Electricity Usage

MWh267,665.24

294,638.67

300,275.98

293,761.00

313,039.12

CO2 Emission Intensity

Energy Consumption

MWh1,195.00

11,192.70

6,581.90

9,306.90725.00737.48Industrial Water

thousand m3

621.80621.80622.20610.00618.10Fresh Water & Ground Water

thousand m3

169.51190.57175.85179.16

197.92

Total

thousand m3

1,378.30

1,527.30

1,557.60

1,514.16

1,553.50

Wastewater Discharge

77.1

76.5

453.90478.13460.38

Data Coverage

%

52.9

50.9

51.3

51.6

47.5

Unit
ISO 14001 Certification Status

58

58

Acquisition Rate

%

77.9

80.0

80.1

80.6

79.4

Number of Cases

Instances

0

0

0

0

0

Data Coverage

%

77.9

80.0

80.1

80.6

79.4

Serious Violations of Environmental
Laws and Regulations*2*2 Cases with fines and penalties of US$10,000 or higher

SocialEmployee Data
Unit

2,965

Ratio

%

89.8

89.1

88.6

88.2

88.0

FemaleNumber of employees

289

327

349

396

405

Ratio

%

10.1

10.9

11.4

11.8

12.0

Total

Number of employees

2,857

3,002

3,068

3,356

3,370

10,248.85

Male

Number of employees

20

20

19

20

21

522,773.61

Ratio

%

100

100

100

100

100

FemaleNumber of employees

0

0

0

0

0

Ratio

%

0.0

0.0

0.0

0.0

0.0

92.6

Total

MWh

323.40335.60323.401,223.30

1,297.59

Data Coverage

%

81.2

80.1

85.9

85.9

92.6

Full-Time Employees/Employees (SHI)

Executive Officers

Managers

Total

Number of employees

20

20

19

20

21

Male

Number of employees

802

817

835

904

916
97.7

Ratio

%

98.5

98.4

98.4

98.2

FemaleNumber of employees

12

13

14

17

22

Ratio

%

1.5

1.6

1.6

1.8

2.3

Total

Number of employees

2018

2019

2020

2021

47,503.35

55,031.60

64,165.10

60,866.40

62,591.06

Final Disposal Volumet704.50760.308,234.10

1,234.70

1,294.45

Under 30

Data Coverage

%

81.0

83.6

85.6

85.5

84.2

30–39

Total

t

287.27

4,079.37

303.21817.65708.26

40–49

Data Coverage684.35691.20SHI Group(Japan)

85.0

87.4

87.8

88.6

86.0

t

111.69128.93121.7499.02

100.37

Xylenet

321.59351.20304.88267.09257.93Ethylbenzenet125.33167.08154.95158.11148.57

Total

t

3.18

2.90

3.11

4.11

3.31

Data Coverage

%

50.4

49.5

49.1

49.5

46.6

Total

t

0.83

0.81

0.64

0.50

0.18

Data Coverage

%

50.4

49.5

49.1

49.5

46.6

72 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

830

849

921

938

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Number of employees

488

527

523

551

529

Number of employees

697

738

777

889

869

Number of employees

740

757

778

831

839

50–59

Number of employees

706

770

777

852

872

Above 60

Number of employees

226

210

213

233

261

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

TargetAverage Length of Service by Gender

Male

Years

16.9

17

16.8

16.6

16.6

Female

Years

12.0

12.0

11.9

11.9

12.1

Total

Years
TargetEmployment Ratio of Disabled People

Total

%
TargetPercentage of Employees Covered byCollective Bargaining Agreements

Total

Rounds of Collective Bargaining (LaborManagement Consultations) with Labor Unions

Total

%
TargetRoundsTarget

16.4

16.4

16.2

16.1

16.1

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

2.44

2.32

2.39

2.32

2.36

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

60.7

60.3

63.4

64.2

60.4

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

—

—

—

—

106

—

—

—

—

Non-consolidated

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 73

CORPORATE DATA%

Breakdown ofdomestic

Employees by Age Group

716.28

Toluene814
Non-consolidated

TargetOUTCOME2017t735.632021
24,58485.9

643.382020
2,960

498,765.81

t

2019
2,719

85.9

Total

2018
2,675

518,677.33

Employees (consolidated)

2017
2,568

80.1

Target2021

56

Number of employees

504,248.92

SHI Group(Japan)

2020

55

Male

81.2

SHI Group(Japan)2019

55

24,050454,298.58

SHI Group(Japan)2018

Instances

23,635%SHI Group(Japan)2017

Number of Certifications Acquired

22,543

MWhVolume of Hazardous
Waste Disposed

Volume of SOx Emissions

80.6

467.5221,017

Total

Waste Generation

Volume of NOx Emissions

79.9

425.15

Number of employees

Waste Management

Volume of Volatile Organic
Compounds (VOC)

76.4

thousand m3

Environmental Management*1 Emissions data for Japan included in Scope 2 is calculated on a market basis

Volume of Waste Disposed

%

Total

Total

Data Coverage

Unit

Data Coverage

SHI MATERIALITY

Renewable Energy Consumption

Water Chilling/Heating

2021

759.55

BUSINESS ACTIVITIES

Cat-07 Employee Commuting
Cat-08 Lease Asset (upstream)

2020

714.92

CAPITALS

Cat-01 Raw Materials
Cat-02 Capital Goods

Water Consumption

2019586.99(The Sources of Our Strengths)

GHG Emissions (Scope 3)

2017

2018

thousand m3

SHI WAY

GHG Emissions (Scope 1)

Unit

2017

Municipal Water SupplyNon-Financial Key Data
CSR Activities

Employee Data
Unit

124

129

139

119

Ratio

%

77.5

81.6

81.1

86.3

79.3

FemaleNumber of employees

31

28

30

22

31

Ratio

%

22.5

18.4

18.9

13.7

20.7

Total

Number of employees

138

152

159

161

150

Unit

2020

2021

2020

2021

72.7

68.9

FemaleNumber of employees

11

15

11

7

8

China

10.7

10.9

12.1

Total

Number of employees

92

101

108

66

98

South Korea

2.8

2.5

2.4

Ratio of Mid-career Hiresto Full-time Workers

%

40.0

39.9

40.4

29.1

39.5

Taiwan

0.2

0.2

0.3

5.1

4.7

6.3

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

—

—

—

—

2.4

North America and Latin
America

6.0

3.5

3.4

5.5

5.5

6.6

0.0

0.0

0.0

Supplier Status by Region(procurement amount ratio)

Male

%

Female

%

—

—

—

—

4.2

Europe

Total

%

2.4

2.7

2.5

2.4

2.6

Other Areas

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Male

%

—

—

—

—

2.1

%

—

—

—

—

3.0

%

1.7

2.2

1.6

2.2

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

—

48

—

49

—

—

SHI and 30
consolidated
subsidiaries—

SHI and 30
consolidated
subsidiaries

—

%

72.3

74.1

75.9

73.6

68.6

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

%

Male

Number of employees

56

77

91

70

62

FemaleNumber of employees

7

5

8

16

10

Number of employees

63

82

99

86

72

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

%

61.5

63.1

85.8

71.4

68.9

%

100

100

100

100

100

Total

%

64.3

64.6

86.8

75.4

72.0

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

7.6

12.3

11.4

11.0

33.3

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Total

Days
TargetMale

Number of employees

—

—

—

—

1

FemaleNumber of employees

—

—

—

—

27

Total

Number of employees

—

—

—

—

28

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

—

—

—

—

4.2

—

—

—

—

SHI Group (in Japan)

—

—

—

49,23079,228———Non-consolidated

Non-consolidated

Target
Total

Hours
TargetTotal

Yen
TargetNumber of employees
TargetFrequency rate

Occupational Accident Frequency
Rate (employees and contract workers)

Frequency rate%
Target%Target

Total

Hours
TargetTotal%
TargetTotal%
Target74 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022

7,537

7,481

Number of Critical Tier 1
Suppliers

Companies

288

288

409

Number of Surveys

Companies

288

288

409

Implementation Rate

%

3.8

3.8

5.5

GovernanceCorporate Governance
Unit

Composition of Directors

Attendance Rate at
Board Meetings

Attendance Rate at Board of
Corporate Auditors Meetings

2018

2019

2020

2021

0

0

0

0

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

0.0

0.5

0.0

0.0

0.3

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

0.1

0.3

0.2

0.2

0.6

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

2,039

2,029

1,989

1,975

1,987

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

—

—

—

33.3

50.0
Domestic Main
Works

—

—

—

Domestic Main
Works

27.3

30.6

27.9

27.7

26.6

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

Non-consolidated

2019

10

10

9

10

9

Executive Directors

Number of directors

8

8

7

7

6

Non-executive Directors

Number of directors

2

2

2

3

3

External Directors

Number of directors

2

2

2

3

3

Female Directors

Number of directors

0

0

0

0

0

Non-Japanese Directors

Number of directors

0

0

0

0

0

Average

%

99.3

99.3

100.0

99.2

98.5

Minimum Attendance Rate

%

93.3

92.9

100.0

92.3

92.9

Years

4.3

4.3

4.0

4.7

3.4

Total Number

Number of directors

4

4

4

4

4

External Corporate Auditors

Number of directors

2

2

2

2

2

Female Corporate Auditors

Number of directors

0

0

0

0

1

Non-Japanese Corporate
Auditors

Number of directors

0

0

0

0

0

Average

%

—

—

—

—

100.0

Minimum Attendance Rate

%

—

—

—

—

100.0

Employees Completing
Compliance Education

Number of employees

10,874

12,231

12,838

14,59914,489Implementation Rate(% of all employees who havecompleted the program)

%

51.7

54.3

54.3

60.7

58.9

Total

Number of employees

2,436

2,748

2,745

2,852

3,217

Submission Rate(% of all employees who
submitted the pledge)

%

11.6

12.2

11.6

11.9

13.1

Total

70

83

125

143

156

Of which, Number of Non-compliance Cases*4

—

—

—

6

10

—

—

—

1.5

1.5

—

—

—

Non-consolidated

Non-consolidated

Business Ethics
Unit

0

2018

Number of directors

Average Tenure of Directors

Composition of Corporate
Auditors

2017

Total Number

Compliance Education by
E-learning

Employees Who Submitted
the Compliance Pledge
Managers Submitting Pledgeof Compliance
Amount of Political Donations

Total¥ million
Target

2017

2018

2019

2020

2021

*4 Excluding cases currently under investigation

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 75

CORPORATE DATA

Occupational Accident Frequency
Rate (employees)

2017

7,559

OUTCOME

Unit
Total

Supplier Survey

Companies

SHI MATERIALITY

Male
FemaleCritical Suppliers

Number of Tier 1 Suppliers

BUSINESS ACTIVITIES

1.5
Non-consolidated%

Asia, etc.

CAPITALS

69.7(The Sources of Our Strengths)

Japan

Occupational Health and Safety/Health Management

Percentage of Smokers

2019

Supply Chain Management90*3 Calculated based on key training programs organized by the Human Resources Group (Head Office)

Percentage of Companies with ISO
45001 Certification

Non-consolidated

Non-consolidated

TargetWorking Hours Per Year

Non-consolidated

59

TargetWork-Related Fatalities

Non-consolidated

Non-consolidated

Total

Annual Training Expenses
Per Employee

Non-consolidated

97

TargetAnnual Training Hours Per Employee *33

Non-consolidated

Non-consolidated

Female

2021
301

86

Total

3

2020
35

Non-consolidated

TargetEmployees Utilizing Shortened
Working Hours for Employees withChildcare Needs

2019
82

81

Employee Awareness Survey Results

Average Number of Days of Childcare
Leave Taken by Male Employees

Target2018
69

Non-consolidated

Percentage of Highly
Engaged EmployeesChildcare Leave Utilization Ratio2017¥ million

Number of employees

TargetEmployees Taking Childcare Leave

Total

Social Contribution
Expenditures

Male

Total

Percentage of Employees Taking
Paid Vacations

Unit

2021

107

TargetRetirement Rate for Personal Reasons

2020

Number of employees

TargetTotal Turnover Rate

2019

Male

TargetCareer Hires

2018

SHI WAY

New Graduate Hires

2017

Corporate Data

(As of March 31, 2022)

1-1, Osaki 2-chome, Shinagawa-ku,
Tokyo 141-6025, Japan

Chubu Office

10-24, Higashi-sakura 1-chome, Higashi-ku,
Nagoya-shi, Aichi 461-0005, Japan

Tel: 81-52-971-3063

Tel+81-3-6737-2331

Kansai Office3-33, Nakanoshima 2-chome, Kita-ku,
Osaka-shi, Osaka 530-0005, Japan

Tel: 81-6-7635-3610

URL

http://www.shi.co.jp/english/index.html

Kyushu OfficeTel: 81-92-283-1670

Founded1888

8-30, Tenyamachi, Hakata-ku, Fukuoka-shi,
Fukuoka 812-0025, Japan

Incorporated

November 1, 1934

Tanashi Works

1-1, Yato-cho 2-chome, Nishitokyo-shi,
Tokyo 188-8585, Japan

Tel: 81-42-468-4104

Paid-In Capital¥30,871,651,300

Chiba Works

Tel: 81-43-420-1351

Number of
Employees

24,584 (Consolidated)
3,370 (Non-consolidated)731-1, Naganumahara-machi, Inage-ku,
Chiba-shi, Chiba 263-0001, Japan

Yokosuka Works

19, Natsushima-cho, Yokosuka-shi,
Kanagawa 237-8555, Japan

Tel: 81-46-869-1842

Nagoya Works

1, Asahi-machi 6-chome, Obu-shi,
Aichi 474-8501, Japan

Tel: 81-562-48-5111

Okayama Works

8230, Tamashima-Otoshima, Kurashiki-shi,
Okayama 713-8501, Japan

Tel: 81-86-525-6101

Ehime Works— Niihama Factory

5-2, Sobiraki-cho, Niihama-shi,Ehime 792-8588, Japan

Tel: 81-897-32-6211

Ehime Works— Saijo Factory

1501, Imazaike, Saijo-shi,Ehime 799-1393, Japan

Tel: 81-898-64-4811

Technology Research 19, Natsushima-cho, Yokosuka-shi,
Kanagawa 237-8555, Japan
CenterTel: 81-46-869-2300

Financial Institutions
37.1%

Stock Information
Transfer Agent

Financial Instruments

Tokyo

Shares Outstanding

122,905,481

43.6%

Number of Shareholders

Other Companies
4.6%

Number ofshares held
(thousandsof shares)

Ownership
ratio (%)

20,297
9,247

16.6
7.5

NORTHERN TRUST CO. (AVFC) RE SILCHESTERINTERNATIONAL INVESTORS INTERNATIONAL VALUEEQUITY TRUST

7,083

5.8

Sumitomo Life Insurance Company

4,333

3.5

NORTHERN TRUST CO. (AVFC) RE U.S. TAX EXEMPTEDPENSION FUNDS

3,959

3.2

3,070
2,442
2,000

2.5
2.0
1.6

NORTHERN TRUST CO. (AVFC) RE IEDU UCITS CLIENTSNON LENDING 15 PCT TREATY ACCOUNT

1,996

1.6

THE BANK OF NEW YORK MELLON 140042

1,948

1.6

Name of shareholder

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

Individuals and Others
12.7%
Financial Institutions
37.1%

Sumitomo Heavy Industries, Ltd. Kyoeikai
NORTHERN TRUST CO. (AVFC) SUB A/C NON TREATY

Financial Instruments
Business Operators
2.0%
Foreign Companies
43.6%

CDP
(Climate Change: B-/Water: B-)

Platinum Kurumin Certification
awarded by MHLW

Sumitomo Mitsui Banking Corporation

3rd Nikkei SDGs
Management Survey

5th Nikkei Smart WorkManagement Survey

Excellent Enterprise of Healthand Productivity Management2022

Note: Ownership ratios are calculated less treasury stock (405,310 shares). The Company’s name islisted as the shareholder of record for treasury stock, but this figure includes 200 shares that
the Company in effect does not own.

OUTCOME

Other Companies
4.6%

EcoVadis

SHI MATERIALITY

Distribution of Shareholders

SOMPO
Sustainability Index(As of March 31, 2022)

Custody Bank of Japan, Ltd. (Trust account)

32,562

S&P/JPX
Carbon Efficient Index

Major Shareholders

Sumitomo Mitsui
Trust
Bank,
Business
Operators
Limited
2.0%

ForeignCompanies
Stock
Exchange
Listing

FTSE Blossom Japan
Sector Relative Index

Share Price Chart(Yen)

TOPIX (right)

Share price (left)

(Yen)
2,000

4,000

1,600

3,000

1,200

2,000

800

1,000

400

CORPORATE DATA

5,000

0

0
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6
(FY)
2017
2018
2019
2020
2021
2022

*(Yen)The Company
carriedout a 5-to-1
reverseTOPIX(right)Shareprice stock(left) split for its common shares with an effective date of October 1, 2017.

(Yen)

5,000

2,000

76 Sumitomo Heavy Industries, Ltd. / Integrated Report 2022
4,000

BUSINESS ACTIVITIES

Individuals and Others
12.7%

Stock-Related Information

Recognition from Society (as of end of August 2022)

CAPITALS

Head Office(The Sources of Our Strengths)

Domestic Offices

SHI WAY

Company Name Sumitomo Heavy Industries, Ltd.

Sumitomo Heavy Industries, Ltd. / Integrated Report 2022 77
1,600

Printed in Japan 2022.10 E 222