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.

Value Creation Story of the Taisei Group

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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 domains of focus: construction, development, engineering, energy, and environment. Expressing the concept of the ever-evolving The CDE3 Company, we also set numerical targets for FY2030 financial results: about ¥2.5 trillion for Group net sales, ¥150 billion for Group net income, and 10% for ROE. We have also established targets for stakeholder (shareholders, employees, customers, suppliers, and society) returns.
During the current three-year period (FY2021–2023), we are reorganizing the Medium-Term Business Plan (2021-2023) by backcasting priority issues to be addressed and working to implement various measures to achieve these targets.

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.

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.”
Our basic policy for human resources is to implement a personnel policy that contributes to corporate value creation and sustainable growth, and we are implementing various measures to realize a work environment that emphasizes job satisfaction and ease of work as well as advancing initiatives to develop professionals with cheerfulness, enthusiasm, integrity, and discipline as businesspeople.
In particular, based on the belief that to realize TAISEI VISION 2030, it is important for all executives and employees of the Taisei Group to have a high level of engagement, we are focusing on reforming the personnel system and developing human resources by identifying medium- to long-term personnel challenges and reorganizing measures for realizing our visions of ideal organizations and human resources as the TAISEI VISION 2030 personnel policy.
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.

In terms of technology, one of the key issues under the Medium-Term Business Plan (2021-2023) is to promote technological development to solve environmental and social issues through open innovation. Under the Plan, the two key measures are technological development that contributes to industrial sectors expected to grow through a virtuous cycle for the economy and the environment as well as technological development in which the Company has a competitive edge. Taking these two measures into account, we are strategically allocating managerial resources to technological development. During the period up to FY2022, investments in technological development under the Plan totaled approximately ¥46 billion. Examples include investments to meet needs in new business areas such as the renewal and transformation of Group-owned facilities to satisfy the Zero Energy Building (ZEB) standards, the establishment of a Group next-generation technology research institute, and the development of construction technologies related to offshore wind power generation as well as investments to further enhance productivity, such as the advancement of construction automation and labor-saving technologies and increased utilization of Building Information Modeling (BIM).

Materiality (Issues to Be Dealt with) / Risks and Opportunities

In alignment with TAISEI VISION 2030 and the Medium-Term Business Plan (2021-2023), the Taisei Group has identified its materiality by recognizing the importance of social concerns, stakeholder interests, and the challenges facing society; analyzing how these correspond to the Group Philosophy and various policies; and assessing their impacts on Group management. We extracted sustainability challenges from the SDGs, GRI Standards, United Nations Global Compact, ISO 26000, SASB, and other sources; made a draft set of key issues by taking into account diverse opinions inside and outside the Company; and deliberated and decided on the Group’s materiality at the Board after holding discussions at the Management Committee and the CSR Committee (now called the Sustainability Committee). We will strive for long-term, sustainable enhancement of corporate value by preventing and reducing risks related to each materiality and then uncovering business opportunities through key measures under the Medium-Term Business Plan.
Among the key measures for risks and opportunities related to climate change, when we formulated the Medium-Term Business Plan, we initially set our target for CO2 emissions from business activities (Scopes 1 and 2) to “virtually zero” (carbon neutral), but in February 2023, we revised our environmental and other policies, setting a 2050 target of achieving and going beyond carbon neutrality as well as stating the objective of reducing Scopes 1 and 2 CO2 emissions to zero and Scope 3 supply chain CO2 emissions to zero. We are thus advancing initiatives for climate-change-related key measures.
The Management Committee and the Board comprehensively consider and decide policies to respond to risks that are likely to have serious effects on corporate management, and such policies are shared throughout the organization. In line with the company-wide risk management system, we are striving to avoid such risks and minimize them if they manifest. The details of these risks are described in the Business and Other Risks section of the annual securities report.

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.

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.

Medium-Term Business Plan (2021-2023) and Numerical Targets/KPIs

To realize the medium- to long-term vision TAISEI VISION 2030 “A pioneering corporate group contributing to the development of a resilient society where people can live affluent and cultural lives,” the Medium-Term Business Plan (2021-2023), a strategy to execute the value creation story, distills key measures through backcasting and, while giving consideration to the current business environment, identifies focusing on implementing such measures during the three years up to 2023 to be a key issue.
Key issues are classified into business-related and sustainability-related issues. With respect to the business-related key issues, we have formulated key measures based on market scenarios for each area and are implementing them according to the numerical targets we have set. For the sustainability-related key issues, we have devised key measures linked to materiality and established KPIs to assess them. Regarding the environmental aspect, we are advancing initiatives to achieve the 2030 target, a milestone for the TAISEI Green Target 2050, which aims to achieve carbon neutrality in 2050, by setting two KPIs: the rate of CO2 emissions to be reduced by FY2023 and the number of orders for Zero Energy Buildings (ZEB). Meanwhile, with regard to society, we have set KPIs while considering how to provide value to diverse stakeholders.
We are implementing measures as required to achieve business-related numerical targets and sustainability-related KPIs by periodically having the Management Committee check and deliberate them as well as having the Board monitor their progress and degree of achievement.
The details of investment plans, technological development, DX, personnel policy, and other matters under the Medium-Term Business Plan (2021-2023) are explained in the document linked below.

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. The Board comprises twelve members: eight from within the Company and four 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 Medium-Term Business Plan (2021-2023), 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.

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.
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. The Taisei Circle newsletter serves as a communication tool, offering shareholders insights into the business activities and ESG initiatives that the Company is focusing on.
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.