Toward Value Creation and Sustainable Growth

Value Creation Story of the Taisei Group

Under the Taisei Group Philosophy of “To create a vibrant environment for all members of society,” the Taisei Group is dedicated to forging a resilient society where people can live affluent and cultural lives.
By building high-quality social infrastructure through our business endeavors and by addressing the challenges faced by our clients and the broader society, we aspire to foster cyclical enhancement of both corporate and social value, aiming for sustainable growth in harmony with society.

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Medium- to Long-Term Vision [TAISEI VISION 2030]

In 2021, based on the Group Philosophy and the Taisei Spirit, we established the medium- to long-term vision [TAISEI VISION 2030]. With our mission being to contribute to the development of a resilient society where people can live affluent and cultural lives, we are working to help solve the challenges faced by our clients and the broader society through business endeavors and to ensure sustainable growth in harmony with society.
In establishing this vision, we identified medium- to long-term environmental and structural changes as “Three Xs” (namely, industry transformation (IX), sustainability transformation (SX), and digital transformation (DX)) and predicted that the intertwining of these three Xs will lead to a significant wave of changes.
In this process, in order to distinguish Taisei from other companies in the market, to ensure the sustainable growth of the Taisei Group, and to realize our vision, we defined five focus areas: construction, development, engineering, energy, and environment. Expressing the concept of the Ever-Evolving CDE3 company, we also set numerical targets for FY2030 financial results: approximately ¥150 billion for Group net income, approximately 10% for ROE, and approximately ¥2.5 trillion for Group net sales. We have also established targets for stakeholder (shareholders, employees, customers, suppliers, and society) returns.
In May 2024, prior to the start of the Medium-Term Business Plan (2024-2026), which is the second phase of [TAISEI VISION 2030], we formulated the [TAISEI VISION 2030] Achievement Plan and organized our efforts for the next seven years until 2030 in order to realize our vision.
During the current three-year period, we are reorganizing the Medium-Term Business Plan (2024-2026) by backcasting priority issues to be addressed and working to implement various measures to achieve these targets.

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Business Model to Enhance Corporate Value

To enhance the Group’s corporate value, to ensure its sustainable growth, and to realize [TAISEI VISION 2030], we will help to solve the issues customers and society face by creating high-quality social infrastructure through business endeavors in each CDE3 domain.
We expect that the domestic construction market will continue to be worth around ¥60 trillion for some time to come despite concerns that it will shrink in the long run. In our core Construction Business, to distinguish Taisei from other companies and to secure competitive advantage, we are striving to implement priority measures, such as building systems for enhancing competitiveness, to win orders; expanding business in the building renovation area, where latent demand is high; and increasing productivity by utilizing digital technology and centralizing operations. One characteristic of the construction market is that the share of major general contractors, including the Taisei Group, is small compared to other industries, and since there is still room for expansion even in the domestic market, we are actively working to expand our business domains in the market through effective use of M&A.
The future of the real estate market is quite uncertain, though there have not been major changes in its conditions. Predicting that in the years to come, we will need to make careful decisions in the Development Business, we consider it a priority issue to optimize our real estate portfolio and to build a stable foundation for profitability by pursuing high investment efficiency.
In the Engineering Business, we reckon that capital investments related to pharmaceuticals, food, logistics, and energy, which are the areas the Taisei Group targets, will generally continue to be strong. As a priority issue, we will expand our business domains by making the most of the strengths we have obtained in pharmaceuticals, food, and other fields, and we are striving to develop our existing areas in greater depth as well as to take on new challenges in growth areas.
In the Energy & Environment Business, with the aim of becoming a front runner in the environmental area, we are concentrating mainly on possessing renewable energy power sources to cover the amount of power consumed by the Taisei Group and improving ZEB performance to maintain competitive advantage. Since it is expected that society’s demands will grow at an accelerating pace in this area, we established systems by setting up the new Sustainability Division (Integrated) in April 2022 and are continuously promoting the development of environmental technology and making environment-related investments.

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Intangible Assets as a Source of Competitive Advantage

We recognize that the most important intangible assets serving as a source of the Taisei Group’s competitive advantage are our human resources and technology, and we have announced a basic stance for realizing [TAISEI VISION 2030]: the “optimal utilization of human capital, technology, and intelligence.”
With regard to human capital, we define it in a fundamental management policy under the [TAISEI VISION 2030] Achievement Plan and aim to recruit and develop human capital, which is a source of competitiveness, and create an environment in which employees can realize their full potential.
While expanding human capital investment to support the Group's sustainable growth, we will enhance employee engagement, achieve employees' physical, mental, and social health and feeling of happiness (well-being), and realize diverse career paths.
In addition, since FY2022, we have conducted an engagement survey of executives and employees, and based on the survey results, we are analyzing issues to address and implementing measures for improvement one after another. From FY2023, we will increase the frequency of engagement surveys carried out to twice per year, and we will strive to boost the engagement level of executives and employees by periodically monitoring improvement and reflecting the results of such monitoring in various management policies.

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As for technology, we define technology development in a fundamental management policy under the [TAISEI VISION 2030] Achievement Plan and have identified four technological areas to be addressed: social and environmental issues, to strengthen social infrastructure, regional revitalization, and new frontier business. We are promoting technology development with a clear timeline and targeted returns as outcomes.
In accordance with the previous Medium-Term Business Plan, we made investments in technological development, including investments to respond to new business fields, such as renovation of the Group’s facilities to ZEB, construction of the Taisei Group Next-Generation Technology Research Institute, and development of construction technologies related to offshore wind power generation, and investments to improve productivity, including development of construction technologies for automation and labor-saving and promotion of the use of BIM.

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Materiality and KPI / Risks and Opportunities

In May 2024, in conjunction with the formulation of the [TAISEI VISION 2030] Achievement Plan and the Medium-Term Business Plan (2024-2026), we reviewed materiality, as well as its positioning in our structure of values and policies. At the same time, in light of the latest sustainability issues, we have also reviewed materiality from the two aspects of “the impact of environment and society (stakeholders) on corporate activities and corporate finances (risks and opportunities)” and “the impact of corporate activities on the environment and society (risks and opportunities).” Each sustainability-related materiality will be incorporated into the measures in the [TAISEI VISION 2030] Achievement Plan, and key performance indicators (KPIs) will be defined in the Medium-Term Business Plan (2024-2026) so that we can work on them in an integrated manner with our business strategies. Business-related numerical targets and sustainability-related KPIs are regularly reviewed and discussed in the management meeting, and the progress and degree of achievement are monitored by the Board, which implement measures as necessary to achieve them. Details of risks are described in the “Business and Other Risks” section of the Annual Securities Report.

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Relationships with Stakeholders

We fully recognize that the Taisei Group is supported by shareholders, investors, customers, local communities, employees, business partners, and various other stakeholders, and we are working to collaborate with our stakeholders to fulfill our social responsibilities and to create value.

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In particular, we believe that business partners such as specialized contractors and suppliers are crucial partners in accomplishing work in a way that exceeds the expectations and imaginations of customers and allies in our mutual endeavors to address social challenges such as environmental concerns and human rights through business activities.
In our business activities, to prevent and mitigate adverse impacts on human rights and the environment, the Taisei Group conducts human rights due diligence based on our human rights policy and environmental due diligence based on our environmental policy. Thus, the Group is working with business partners to carry out initiatives on human rights and environmental challenges throughout the entire supply chain for continuous improvement.
To fulfill our responsibilities as a comprehensive construction company that supports the infrastructure underpinning social and economic activities when large-scale disasters, accidents, and other crises occur, we have worked out a business continuity plan in the event of disaster and are conducting large-scale disaster response drills annually. By having our business partners participate in these drills, we have put in place a system that enables us to respond together to disasters that occur.

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Governance System that Supports the Group’s Initiatives

The Taisei Group’s basic policy on corporate governance is to ensure the swiftness, appropriateness, fairness, and transparency of decision-making in management in order to pursue sustainable development as a corporate group and to earn society’s trust.
Taisei Corporation has chosen a company structure with an Audit & Supervisory Board. The Board of Directors (the Board) strives for the Company’s sustainable growth and the enhancement of corporate value in the medium to long run and focuses on its supervisory functions. Its primary roles and responsibilities are (1) to indicate the future directions from wide viewpoints in respect of the corporate strategy, (2) to establish an environment that supports risk-taking by the senior management, and (3) to effectively oversee the management and the members of the Board from the independent and objective viewpoints. As of June 20 2024, the Board comprises 12 members: seven from within the Company and five external members. The external members of the Board provide objective perspectives based on their knowledge, enriching board deliberations with diverse views and contributing to the strengthening of management oversight.
The Company has also established the Management Committee as the highest decision-making body on the execution side, and the Committee deliberates and resolves business execution matters delegated by the Board. Chaired by the President, the Committee includes eleven members chosen by the Board.
The implementation of the [TAISEI VISION 2030] Achievement Plan / Medium-Term Business Plan (2024-2026), a strategy to execute the value creation story, and the achievement of numerical targets and KPIs are periodically checked and deliberated by the Management Committee, while their progress and degree of achievement are monitored by the Board, and the Company takes measures to achieve them as required. In addition, each year, the Board analyzes and evaluates its effectiveness for improvement, thus sophisticating governance to enhance corporate value from a long-term perspective in a sustainable manner.

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Dialogue and Engagement with Investors

The Company is committed to fostering constructive dialogues with shareholders and investors as it strives for sustainable growth and enhanced corporate value in the medium to long run. Its timely, appropriate information disclosures and clear explanations about the big picture of the value creation story and its components lay the foundation for these dialogues.
In alignment with our Information Disclosure Policy and the Fundamental Corporate Governance Policy, we ensure compliance with legal and stock exchange regulations when revealing financial results, management strategies, risk factors, governance structures, human capital management, intellectual property, and sustainability initiatives. We also strive to share up-to-date insights about our business activities with stakeholders through our website and annual reports.
For dialogues with shareholders and investors, our actions are grounded in our IR policy. We promote constructive dialogues through interviews, IR briefings, and general meetings of shareholders. Specifically, we conduct semiannual briefings on financial results, hold individual meetings for both domestic and foreign institutional investors, and engage in IR activities abroad. In addition to the management, external members of the Board and members of the Audit & Supervisory Board attend these meetings as necessary, taking investor requests into consideration.
We document these dialogues and interactions internally. Reports capturing such engagements are shared monthly with senior management and presented in detail to the members of the Board at least twice a year, ensuring that our investor relations activities contribute to enhancing our management capabilities. Based on the suggestions received through dialogues in recent years, we have clarified our goals for reducing cross-shareholdings, and progress in this effort is explained to investors through dialogues and disclosed through Corporate Governance Reports, Annual Securities Reports, and other documents.

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Sustainability

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