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].
In establishing this vision, we identified medium- to long-term external environment and structural changes as “Three Xs” (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.
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: approx. 150 billion yen for Group net income, approx. 10% for ROE, and approx. 2.5 trillion yen for Group net sales. We have also established targets for stakeholder returns.
In May 2024, we revised part of [TAISEI VISION 2030] based on a review of the Medium-Term Business Plan (2021-2023), which was the first phase of achieving the vision, and the current situation regarding the medium- to long-term external environment and structural changes, in order to clarify our profit-oriented stance. We also formulated the [TAISEI VISION 2030] Achievement Plan, which outlines the key issues and measures we will work on over the next seven years, and we are working to achieve our vision by backcasting from this plan as well as organizing targets and measures for the next three years, which will serve as milestones, into the Medium-Term Business Plan (2024-2026).

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Materiality and KPI

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 as “the basic stance for conducting business activities.” 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),” and revised the materiality issues to the following five:

  • 1.Co-creation of new value to realize affluent lives
  • 2.Realization of a sustainable, environmentally friendly society
  • 3.Realization of a society and workplace environment where everyone can work lively
  • 4.Integrity and Pride in manufacturing: Safety, Quality, and Technology
  • 5.Fair corporate activities that support trust: Compliance and Governance

For each materiality, key performance indicators (KPIs) have been defined in the [TAISEI VISION 2030] Achievement Plan and the Medium-Term Business Plan (2024-2026), and we are working on them in an integrated manner with our business strategies.
Numerical management targets and KPIs are regularly reviewed and discussed by the Management Committee, while their progress and degree of achievement are monitored by the Board, which implements measures as necessary to achieve them.

Business Model to Enhance Corporate Value

We recognize that the competitive advantage of the Taisei Group is our ability to solve the issues of our clients and society in all aspects of the construction value chain, based on the strengths we have cultivated in human capital, technology, and finance.
With regard to the construction business, which is the Group’s core business, we expect construction investment from the demand side in the Japanese market to continue to increase steadily over the medium to long term, reflecting the economic recovery from the COVID-19 pandemic and the outlook for rising prices, and to remain above 70 trillion yen for the time being. On the other hand, labor shortages due to the declining birth rate and the aging population will continue to put pressure on the supply side, and there are concerns about continued upward pressure on construction prices due to the widening gap between supply and demand.
In the medium- to long-term business strategy of the [TAISEI VISION 2030] Achievement Plan compiled in May 2024, we analyzed risks and opportunities as well as the Group’s strengths in each of the five business segments (Group Domestic Building Construction Business, Group Domestic Civil Engineering Business, Group Domestic Real Estate Development Business, Group Overseas Business, and Group Engineering Business) in construction, development, and engineering of CDE3; have organized the vision and achievement story for 2030; and are strengthening our efforts to achieve them.
It is our aim to stabilize our profit base by diversifying our business through the development of business markets based on construction along with the expansion of our upstream and downstream businesses. Under our aforementioned new business models, we are promoting initiatives such as the Regional Collaboration Strategy and the O&M Business.
Furthermore, as common business transformation initiatives necessary for implementing medium- to long-term business strategies, we have organized policies and measures related to DX, M&A, and the New Business Creation Supporting Program as methodologies for business transformation.
With regard to the environment and energy, we have formulated a “Sustainability Strategy (Environment and Energy)” as one of the “Policies on Business Foundation Development” in the [TAISEI VISION 2030] Achievement Plan; have set priority measures for achieving our 2030 targets for each of the “decarbonized society,” “recycling-oriented society,” and “nature co-existing society”; and are promoting initiatives to contribute to solving the issues of our clients and society.

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Intangible Assets as a Source of Competitive Advantage

The most important intangible assets serving as a source of the Taisei Group's competitive advantage are our human capital and technology.
With regard to human capital, we define it in the Fundamental Management Policy under the [TAISEI VISION 2030] Achievement Plan and aim to recruit and develop human capital as well as to 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.
As for technology, we define technology development in the 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. Under the Medium-Term Business Plan (2024-2026), we will invest 125 billion yen over three years in technology development and DX.

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Relationships with Stakeholders

Based on the concepts of ESG and the SDGs, we fully recognize that the Taisei Group is supported by our employees and their families, our clients, our partner companies and business partners, local communities, NPOs, NGOs, the global environment, our shareholders and investors, and various other stakeholders. In light of this recognition, our fundamental approach to stakeholders is to fulfill our social responsibilities and to strive for sustainable growth as well as medium- to long-term improvements in corporate 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 clients and allies in our mutual endeavors to address social challenges such as environmental concerns and human rights through business activities.
We work to prevent and mitigate risks throughout the supply chain and adverse impacts associated with our business through environmental and human rights due diligence.
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 disaster risks.

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Risks and Opportunities

We are strengthening our efforts to achieve each business's 2030 vision by reflecting the risks and opportunities associated with the Taisei Group's five business segments in each business's achievement story.
In addition, we analyze risks and opportunities related to sustainability, such as the environment and human rights, on an issue-by-issue basis, and then establish measures per issue in the Fundamental Management Policy and the policy on business foundation development of the [TAISEI VISION 2030] Achievement Plan. In this way, we work to seize business opportunities while preventing and mitigating risks, and to achieve sustainable growth and enhance our corporate value.
Under the guidance of our Risk Management Policy and the Basic Risk Management Regulations, we have implemented a risk management system Group-wide to address ESG-related risks. The details of risks are described in the “Business and Other Risks” section of the Annual Securities Report.

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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) 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.
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.
With regard to information disclosures, we ensure compliance with legal and stock exchange regulations in alignment with our Information Disclosure Policy and the Fundamental Corporate Governance Policy. We also strive to share up-to-date insights about the Group's business activities with stakeholders in a timely and easy-to-understand manner through our website and Integrated Reports, as appropriate.
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. 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. In FY2024, we held small meetings between the President and the Chief Financial Officer and major domestic institutional investors.
In response to the feedback and requests we have received over the years, we have implemented the following:

  • ➢Regarding the numerical targets for reducing cross-shareholdings, the targets initially announced in May 2023 of reducing cross-shareholdings to less than 30% of consolidated net assets by the end of FY2026 and to less than 20% by the end of FY2030 have been brought forward to “aim to reduce cross-shareholdings to less than 20% by the end of FY2026” in order to further accelerate efforts to reduce cross-shareholdings. In FY2023, 57 listed stocks (49.7 billion yen) and 6 unlisted stocks (200 million yen) were sold (including partial sales).
  • ➢In the financial policy of the [TAISEI VISION 2030] Achievement Plan, the Company has formulated policies of (1) continued assurance of an ROE of approx. 10% and pursuit of the optimal capital structure, and (2) implementation of growth investments based on investment criteria and fund allocation policies, and has disclosed these as an “Action to Realize Management that is Conscious of Cost of Capital and Stock Price.”

We will explain our progress in these efforts to shareholders and investors through dialogues and disclose the information through Corporate Governance Reports, Annual Securities Reports, and other documents.

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Sustainability

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