高砂熱学工業（1969） – TAKASAGO CORPORATE REPORT 2021

TAKASAGO CORPORATE REPORT 2021TAKASAGOCORPORATE REPORT2021Environmental Creator(cid:9597)TAKASAGOCORPORATE REPORT2021Environmental Creator(cid:9597)Mission and Targets as an“Environmental Creator® ”“Environmental creation needed by the earth and people”Takasago Thermal Engineering Group, as an “Environmental Creator® ,” will commit to the creation of comfortable and optimum space and the conservation of the global environment through the development of a one-stop service business targeting building space with HVAC construction at the core and the establishment of innovative business fields in the Relationship of major reporting materialsenergy sector, among other sectors.Financial and Non-Financial PerformanceRisk ManagementFY2020 HighlightsSupply of Quality that Generates Satisfaction Principles and strategiesS Commitment to SocietyHuman and Organizational Capital: Employee Satisfaction　　　　　　　　Establishment of TakasagoWaySpecial FeatureHarmony with SocietyG Commitment toGovernanceEnhancement of Corporate GovernanceManagement TeamInterviews with Outside Directorand TrustComplianceProgress in the BusinessBusiness in Japan　　　　　　　　Interview with CDXOSpecial FeatureInternational BusinessEnvironmental BusinessBasic InformationCorporate OverviewFinancial and Non-Financial Data 454951535963656971737779838589CONTENTSPrinciples and strategiesMissions and Targets as “Environmental Creator® ”Content and Editorial PolicyCorporate Mission, Management Philosophy, and Action Guideline (TakasagoWay)Message from CEOMessage from COOHistory of Value creationValue Creation ModelMessage from CFOCommitment to ESGESG and SDGs Promotion SystemMaterial IssuesTCFD Initiatives and Information DisclosureECommitment to the Environment 　　　　 　　　Hydrogen BusinessSpecial Feature　　　　　　　　Takasago Thermal Engineering Special Feature　　　 　　　 Innovation CenterResearch and DevelopmentNatural Capital: Environmental Conservation　　　　　　　　Energy-Saving and Environmental Special Feature　　　　　　　　Impact Reduction TechnologyEditorial policy010203050713151721232527293133353941The Takasago Thermal Engineering Group started to issue the Corporate Report (an integrated report) in 2017, and this is the fifth report. We have kept in mind that this report contains useful information for those who are interested in the current situation and medium- to long-term future of the Takasago Thermal Engineering Group. We will continue to improve the quality of the report based on your feedback and suggestions.●Target organizations for this reportTakasago Thermal Engineering Co., Ltd. (all offices both in Japan and overseas) and Takasago Thermal Engineering Group companies* The entire Takasago Thermal Engineering Group is referred to as “the Takasago Thermal Engineering Group” or “our Group,” and Takasago Thermal Engineering Co., Ltd. alone is referred to as “Takasago Thermal Engineering” or “we.”●Month of issueDecember 2021●Reporting periodApril 1, 2020 to March 31, 2021　* Some information before/after this period is included.●Referenced guidelines”International Integrated Reporting Framework,” InternationalIntegrated Reporting Council (IIRC)”Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation,” Ministry ofEconomy, Trade and Industry (METI)”G4 Sustainability Reporting Guidelines (4th edition),” GlobalReporting Initiative (GRI)TAKASAGOCORPORATE REPORT2021環境クリエイター (cid:9597)Corporate Report(This booklet)Technology & Services(website)ESG･CSR (website)Investor Relations(website)●CSR Activities Report(including data section)●Corporate Governance Report●Brief note on the settlement of accounts　●Securities report●Shareholder newsletter　●Financial Results (in English)●Financial results presentation(reference materials)　●Green Air® TechFor details, see the website of Takasago Thermal Engineering　https://www.tte-net.com01TAKA SAGO COR PORATE REP ORT 202 1TAK AS AGO CO RPOR ATE R EP ORT 202102Corporate Mission,Management Philosophy,and Action GuidelineAs a pioneer of HVAC technology, Takasago Thermal Engineering, with adherence to the Corporate Mission of “Contribution to society through personal harmony and creativity,” has been working on the provision of the best product quality, ingenious technological development, and the development of human resources that can live up to these two. We will remain committed to raising different stakeholders’ hopes and contributing to society after the 100th anniversary of our founding as well.CorporateMissionCont ribution to societ y t hr ou gh per sonal ha rmony a nd crea ti vityManagementPhilosophy1 To serve society through the development of business activities that focus on the creation of the best product quality2 To develop distinctive technology that serves our customers’ needs and utilizes the creativity of all employees3 To enhance personal character and harmony between people by nurturing talent and promoting mutual respectIt has been over 30 years since we formulated the action guideline in 1985. In order to align the Takasago Thermal Engineering Group employees across the world in the same direction in view of our 100th anniversary in 2023, we renewed the action guideline as “TakasagoWay.” By familiarizing TakasagoWay, which specifies the company’s DNA (or values) in the form of three core values and 12 phrases for understanding the core values deeply, with the employees to encourage each of them to act autonomously, we will build up a solid foundation for the next 100 years. CorporateMissionManagementPhilosophyAction GuidelineTakasagoWayLong-Term Management FrameworkGReeN PR!DE 100Medium-Term Business PlaniNnovate on 2023 go beyond!Principles and strategiesCorporateMissionManagementPhilosophyAction GuidelineTakasagoWayDeclares the corporate attitude straightforward through a summarized expression of the concept of the management philosophyExpresses Takasago Thermal Engineering’s basic principles that should be practiced through daily business activitiesValues based on which each person thinks and acts by themselves to embody the corporate mission, management philosophyBeyondOffer more valuethan is expected01. If anything is needed but not available, we will make it ourselves02. Take it not as someone’s matter but your own matter03. Place yourself in the other person’s position04. Go beyond conventional frameworks05. Takasago as a company respecting safety, Takasago as a company respecting compliancePrideGet through a task openlyand squarely06. Respectable behaviors 07. Have eagerness and sincerity for whatever you do08. Give it a try, offer opportunities to give it a tryTrustTies with other peopleare a fortune09. It is people, not organizations that you please10. Respect all people involved11. Help and supplement each other 12. One for All, All for One03TAKA SAGO COR PORATE REP ORT 202 1TAK AS AGO CO RPOR ATE R EP ORT 202104Message from CEOPrinciples and strategiesRiding on the strength as a professional comfortable space creator, we will go on driving innovative changes to achieve a low carbon society as a global environmental solution company. At present, the business environment is steady as will work on business model reform and our business the manufacturing sector, such as semiconductors fields expansion on the basis of air conditioning and electronics parts, is thriving and redevelopment projects in large urban cities are in progress, while technology capable of creating comfortable space.We are operating in 10 countries centered on it is forecast that future workforce supply capabilities Southeast Asia apart from the mother market Japan. at a macro level will decline in view of the falling Although the COVID-19 impact is huge, we have to population in the country and the year 2024 problem. enhance our presence in the global market to In addition to enhancing each person’s productivity contribute to the global environment in view of a to improve our business competitiveness, we believe post-COVID-19 world.that expanding solution fields contributing to the Citing the phrase “Strategy the second class, action global environment with the air conditioning business the first class” in-house, we always stress that it is at the core will increase our corporate value and important to act as soon as you form a strategy and meet the expectations of stakeholders who support to review it flexibly according to the action result. us. As the “Takasago as technology” that handles As a global environmental solution company, we will heat and energy, and a professional company that is contribute to the realization of a low carbon society currently focusing on energy services and green with promptness of action in mind. hydrogen to offer a comfortable environment, we Toward increasing non-financial value―investment in human resources, Takasago brandWhile we do not have hardware assets such as large production bases, our Group employees are working with makers and partner companies to create various spaces. Business is people, indeed, and no other asset is greater than people. With further investment in human resources, we will help each employee stimulate one another on a daily basis, demonstrate their ability to the fullest, and opportunity. In the face of the situation, we have to raise the Takasago brand and its visibility through active public relations emphasizing efforts for environmental creations based on our high-level c o n s t r u c t i o n m a n a g e m e n t a n d e n e r g y – s a v i n g technology-led comfortable spaces creation. We will try to further enhance human resources value as a non-financial off-balance-sheet asset, and offer new values to society sustainably. Takasago brand. Takasago Thermal Engineering is known within the industry, but public awareness of us is still low. Environmental and ESG efforts will prevail globally at an accelerating pace not as a cost but as an First step toward the new TakasagoTakasago, which marks our 100th anniversary in comfortable spaces and the realization of a low 2023, has to move toward the next 100 years. As a carbon society based on the establishment of new leading air conditioning company, we will take s t e a d y a n d p o w e r f u l s t e p s t o w a r d a g l o b a l b u s i n e s s fi e l d s . Y o u r s u p p o r t f o r u s w o u l d b e appreciated.environmental solution company contributing to the g l o b a l e n v i r o n m e n t t h r o u g h t h e c r e a t i o n o f Atsushi OuchiChairman and Representative DirectorCEORise in uncertainties like climate change and contributions to a low carbon societyWhile 2021 witnessed the Olympics and Paralympics other hand, what is becoming more certain is that Games, put off for one year, draw to close, COVID-19 there is no time left to lose for accelerating efforts is still casting a shadow globally partly because for decarbonization. Of the energy consumed in of the emergence of mutant strains. Apart from buildings, air conditioning accounts for as much as COVID-19, as extreme weather events such as r o u g h l y 4 0 % . W h i l e r e c o g n i z i n g o u r s o l i d record heavy rains and large wildfires are raging, responsibility for realizing a low carbon society, we uncertainties are rising to such an extent that feel that it has huge potential for our growth.VUCA does not have to be used any longer. On the Further strengthening Takasago Thermal Engineering’s core value, on-site capabilities and reforming the business modelOur main business is air conditioning and since our through construction results over the ages. In founding in 1923, we have applied air conditioning addition to promoting ongoing DX and off-site and heat storage technologies to create comfortable construction work, we will accelerate research and infrastructures needed by customers, which are development in the Takasago Thermal Engineering required to be environmentally friendly in recent I n n o v a t i o n C e n t e r , w h i c h w a s n e w l y b u i l t i n times. This is supported by our on-site capabilities Tsukubamirai City, Ibaraki Prefecture, to further built on knowledge and technologies accumulated strengthen our on-site capabilities.05TAKA SAGO COR PORATE REP ORT 202 1TAK AS AGO CO RPOR ATE R EP ORT 202106Message from COOPrinciples and strategiesAs a n environm enta l creato r ® that crea te s an en vironment t he earth and people need, we will contribute to th e de velo pment o f a sustainable society. Kazuhito KojimaPresident and Representative DirectorCOODear stakeholdersWhile our 100th anniversary is approaching, we are facing various management issues including the development of the environment for a low carbon society, COVID-19, and the proliferation of digital technology. Amid an era when future prediction is said to be difficult, we will open up the future with our technology capable of addressing global issues based on the DNA of Takasago Thermal Engineering that has been seeking to offer more added value than our customers and society expect. Today is symbolized by the acronym ESG, which we recognize as exactly embodying Takasago Thermal Engineering’s corporate mission, management philosophy. Since our founding, we have adhered to the corporate mission “Contribution to society through personal harmony and creativity,” committing to enriching people’s life and developing a socioeconomy through HVAC. I believe that the basic principle of corporate activities is understanding nature’s law, putting harmony among nature, society, and humans before anything else, and acting with restraint. Principles must be expressed by deeds, not by words. To achieve “carbon neutrality by 2050” as declared by the government, a pile of challenges lies ahead, but as an environmental creator (cid:8060), we will lead society, dedicated to the realization of a low carbon society. continued support to us.W e w o u l d a p p r e c i a t e i t i f y o u c o u l d e x p e c t m u c h f r o m o u r f u t u r e a n d p r o v i d e y o u r 07TAKA SAGO COR PORATE REP ORT 202 1TAK AS AGO CO RPOR ATE R EP ORT 202108Message from COOPrinciples and strategiesReview of the previous fiscal year (performance, market environment, initiation of the medium-term business plan)In fiscal 2020 (year ending March 2021), construction S u r r o u n d e d b y s u c h c i r c u m s t a n c e s , I b e c a m e demand that had peaked because of the Tokyo President and Representative Director, COO on April Olympics and Paralympics went down, while, at 1, 2020 and gave a green light to the medium-term present, in addition to expected continuation of business plan (cid:9517)(cid:9490)(cid:9522)(cid:9523)(cid:9530)(cid:9509)(cid:9528)(cid:9513)(cid:9444)(cid:9523)(cid:9522)(cid:9444)(cid:9462)(cid:9460)(cid:9462)(cid:9463)(cid:9444)(cid:9515)(cid:9523)(cid:9444)(cid:9510)(cid:9513)(cid:9533)(cid:9523)(cid:9522)(cid:9512)(cid:9444)(cid:9445)large-scale redevelopment projects mainly in the W e s e t ” c o m m i t m e n t t o E S G a n d S D G s ” a n d Tokyo Metropolitan Area, construction demand “enhancement of employee engagement with the r e m a i n s s t e a d y b e c a u s e o f r i s i n g d e m a n d f o r company” as the core elements of our business, now semiconductors. implementing 3 growth strategies under the basic In addition, as illustrated in the Japanese government’s p o l i c i e s f o r “ s t r e n g t h e n i n g o f m a n a g e m e n t declaration of “carbon neutrality by 2050” and infrastructure.” The business environment during the revised Corporate Governance Code accompanied by period of the current medium-term business plan modified market segmentation of the Tokyo Exchange differs from that during the period of the previous Market, ESG is facing a major turning point. As the medium-term business plan, when construction market move toward decarbonization is accelerating globally, was thriving, but we set the target sales of 325 billion each company is required to be more committed yen, up from the previous medium-term business plan’s to CO₂ emissions reduction. Our company, which final fiscal year target 320.8 billion yen, and the engages in HVAC systems that consume a lot of ordinary income of 20 billion yen. Besides, we also set energy for operating buildings, recognizes greater quantitative CO₂ emissions reduction targets up to expectations from society and a larger role to assume 2030, the year when SDGs are to be achieved. As a in terms of how we can contribute to achieving not stepwise goal for the reduction efforts, we set in the only ZEB (Net Zero Energy Building) combining current medium-term business plan a 10% reduction energy and CO₂ saving and energy creation but also from the 2019 level as the goal for the current a low carbon society. medium-term business plan’s final fiscal year 2023.Future outlook of the construction market and risks and opportunities surrounding changes in the business environmentThe business environment in the construction industry of which we are part witnesses uncertainties Demographic changes, falling population, and aging societyand complexities surrounding business continuity growing due to environmental policies concerning We view these changes as hugely influential on e n e r g y a n d c l i m a t e c h a n g e i s s u e s a s w e l l a s construction demand and the production system. demographic changes, technological progress, and Investment amounts, which had peaked around 1990 occurrence of infectious diseases represented by and dropped after the bubble economy, rebounded COVID-19. temporarily in recent times partly because of the We are formulating and implementing policies and Olympics and Paralympics, but are expected to go measures for addressing challenges that influence down as the population falls.the execution of our Group business. The challenges We believe that in the labor-intensive construction whose impact we consider to be huge for our industry, a shrinking manufacturing workforce means business are as follows:Commitment to climate change issues, energy issues, and low carbon societyaging of and a decrease in construction workers, which will be detrimental to securing of the workforce and maintenance and enhancement of productivity. In addition, in response to the application of the ceiling on overtime work to the construction industry as While there can be risks to smooth production well starting FY2024, we, in a bid to break away activities like rising costs triggered by supply chain from or reform existing construction management disruption, we, based on our technologies in the methods, are working on a drastic review of what the t h e r m a l e n e r g y fi e l d a c c u m u l a t e d t h r o u g h a i r construction system should be, trying not to become conditioning, will contribute to the preservation of entrenched in traditional methods and practices. We the global environment by committing to energy will apply the review result to manpower saving and saving and CO₂ saving in customers’ facilities.standardization and equalization of construction management work for solving issues.● KGIs (Key Goal Indicator) for the medium-term business planThe Takasago Thermal Engineering Group set the FY2023 KGIs▶4 KGIs: Sales; Ordinary income; ROE; and CO₂ reductionContribution to the globalenvironment for the creationof a low-carbon societyas an environmental creator®Performance targets for FY2023(consolidated)● Net sales(an increase of 1% from the FY2019 level)325.0 billion yen● Ordinary income(an increase of 4% from the FY2019 level)20.0 billion yen● ROE(10.8% in FY2019)● CO₂ emissions (Scope 1 and 2)10 % or moreReduction of10% or more(from the FY2019 level)(Reduction of 5% or more in the whole scope)* CO₂ emissions are for Takasago Thermal Engineering alone FY 2020FY 2019 Scope 1 and 2CO₂ emissions:Reduction of 27.5% or more(whole scope: Reduction of 13.5% or more)(from the FY2019 level)FY 2030FY 2023100th anniversaryPerformance for FY2023 (consolidated)Net sales320.8 billion yenOrdinary income19.2 billion yenROE10.8%CO₂ emissions4,890,000 tons-CO₂ (whole scope)* On the condition that the impact of COVID-19 declines gradually from the second half of FY2021● Consolidated performance of our GroupNet sales (left axis)Ordinary income (right axis)Net sales to ordinary income6.0％5.7％5.8％5.2％289,933300,000260,204260,204319,834320,8936.2％325,0004.5％4.5％275,181275,18117,46118,35918,35919,28612,30020,00013,427（million yen）500,000400,000200,000100,0000（million yen）50,00040,00030,00020,00010,0000Results in 2016Results in 2017Results in 2018Results in 2019Results in 2020Targets for 202309TAKA SAGO COR PORATE REP ORT 202 1TAK AS AGO CO RPOR ATE R EP ORT 202110Message from COOPrinciples and strategiesTechnological progressAs illustrated in the proliferation of EV in the auto and chances to create new innovations are spreading. industry and the fast growing information and The key to creating new innovations probably lies in communication technology industry, technologies in how to use information. each industry are changing both in speed and quality By connecting knowledge and information that has at an unprecedented level. These new technology been scattered around to each stakeholder including and business models may bring about a drastic t h e c o m p a n y a n d c u s t o m e r s t h r o u g h d i g i t a l change or the threat of new entry in the construction technology and transforming all business activities, we industry, which has managed to avoid major industry find it possible to come up with new problem-solving restructuring and block newcomers. methods and provide added value. For that purpose, Reversely, it can also be said that the reform of the we will promote DX (Digital Transformation).business model based on cutting-edge technologies Commitment to ESG and SDGs, progress in the medium-term business planProgress in “commitment to ESG” that makes up the technology is attracting attention as next-generation core of our business is as follows:energy and we have been advancing development in Ｅ (Environment): Toward an environmental creator (cid:8060) company thatcontributes to global environmental conservationhydrogen formation and hydrogen accumulation for ages. With further advancement of the technology, we aim for its early practical use in society and a lunar economic zone. To that end, we will continue to W e b e l i e v e t h a t w e c a n m a k e e n v i r o n m e n t a l make a steady progress in the future.contributions through our main business. By providing support to air conditioning equipment, we deliver to a customer’s facility in the form of the introduction and Ｓ (Society): Enhancement of employee engagementrenewal of an energy-saving system in addition to Our company, where people are the greatest asset, equipment operations support from designing and depends on each employee’s fullest demonstration of construction to completion and after, so we are their ability for sustainable growth. In addition to helping save energy and reduce CO₂ emissions. To developing a flexible employee-friendly personnel accelerate these efforts, with the target value for CO₂ system, we are creating a human resources utilization emissions reduction set as a KGI in the medium-term strategy based on each employee’s personal data to business plan, with the announcement of our approval realize work styles benefiting human resources. for TCFD (Task Force on Climate-related Financial When it comes to harmony with local communities, Disclosures), and with the acquisition of an SBT the COVID-19 pandemic forced us to call off volunteer (Science Based Targets) initiative certification, we will activities and environmental preservation ones or advance our commitment to reduction goals and discouraged us from taking part in them, but we disclose it positively. donated some of our products such as BARRIFLOW In the Takasago Thermal Engineering Innovation and BARRIHOOD to local municipalities in order to Center, which was opened in Tsukubamirai City, curb the pandemic instead. Ibaraki Prefecture, in 2020, taking advantage of it In June 2021, as another effort to curb the pandemic, being an in-house facility, we have examined the we created an open innovation system using our own effects of introducing a variety of environmental or c h l o r i n e d i o x i d e t e c h n o l o g y a n d r e l e a s e d t h e energy-saving technologies including ones whose technology for early practical use of technology in effects have not been demonstrated yet. Through products.t h e s e a c t i v i t i e s , w e a r e p r e p a r i n g a r e c i p e o f technologies for achieving ZEB and will go on honing our technological edge so that ZEB can be achieved G (Governance): Enhancement of governancei n a n o p t i m u m m a n n e r t h a t s h o u l d a l s o b e We are working on governance enhancement with a customer-friendly. view to a long-term increase in corporate value. In addition, we will go on developing a new energy In order to strengthen the functions and improve the field for a low carbon society. Hydrogen-related effectiveness of the Board of Directors, we have raised the ratio of outside directors. Besides, in order When it comes to shares held for policy purposes, to accelerate efforts for contributions to the global shareholding suitability is assessed by the Board of environment, we have introduced a system that Directors every year and some stocks are sold reflects the degree of achievement of CO₂ emissions accordingly, in compliance with the Corporate goals in the assessment of directors. Governance Code.Progress in the medium-term business plan(progress in each growth strategy)Progress in each growth strategy in place under the 3 as technological and sales capabilities. We are also basic policies is as follows:Strengthening of business in Japanengaged in fostering of executives and improvement of the skills of each employee in local overseas subsidiaries for resulting reinforcement of their In order to reform the construction process through management. With the establishment of the “All the fundamental reform of the core business, we have Takasago” system, we will continue to work on started a trial introduction of T-Base(cid:8060). This project, m a n a g e m e n t s t a b i l i z a t i o n a n d i n i t i a t i v e s t o which carries out construction management focusing reform the business model.on single-item production on construction sites off-site, aims to improve construction quality and level Commitment to the environmental businesstasks. It is expected to function as a measure against In a bid to establish our second and third core future decrease in the number of construction businesses with a view to medium- to long-term workers. future, we are working to expand new business For deepening of design technique, in order to fields with the environmental business-related c o n s o l i d a t e k n o w l e d g e o n d e s i g n t e c h n i q u e s R & D and basic technologies for air conditioning scattered in each main and branch office and each accumulated so far at the core. department, we founded the Design Supervisory Taking advantage of the location in Tsukuba, the Department in the Head Office in April 2021, focusing Takasago Thermal Engineering Innovation Center is on the industrial air conditioning field which is increasing opportunities for co-creation and engaging recently growing in demand and strengthening design in speedy innovation creations with the help of techniques of air conditioning equipment such as industry-government-academia cooperation. design renewal and developing human resources.As a step for the expansion of new business fields, Reform of international businesswe are trying to fuse hydrogen-related technologies we have developed with green energy.The impact of COVID-19 differs, depending on the We are also advancing the real estate business overseas base, but as a whole, other countries HERE™ with a view to reducing the environmental restrict people’s activities more strictly than Japan impact and improving consumers’ comfort.and we need to keep abreast of new development of As for progress in the lunar exploration program the pandemic. H A K U T O – R p r o j e c t , w e , a s a m e m b e r o f t h e Under such circumstances, in order to establish industry-government-academia council, submitted robust business infrastructure in overseas markets, we to the Japanese government the “Lunar Industry transferred the International Business Headquarters in Vision” in July 2021 in anticipation of the construction the Business Management Headquarters starting of an ecosystem for Japan’s lunar business, steadily FY2021. The transfer has enabled closer cooperation between it and other headquarters in the Head Office advancing toward hydrogen production on the moon for the first time in the world.as well as strengthening of management control such 11TAKA SAGO COR PORATE REP ORT 202 1TAK AS AGO CO RPOR ATE R EP ORT 202112History ofTakasago Thermal EngineeringTakasago Thermal Engineering History of value creationSince its founding in 1923, the company, mainly covering HVAC system construction and its peripheral fields, has engaged in technological advancement through designs and construction living up to customers’ trust and the development of optimum systems and devices. Using technologies accumulated so far, we aim to achieve a low-carbon and sustainable society, going on pursuing technological advancement.1923Our backgroundTakasago Kogyo’s heating division, which had been manufacturing potassium chlorate, a material for matches, one of the star export industries of the day, became independent and was reborn as Takasago Heating Works Co., Ltd. on November 16, 1923. The founder was Kunizo Hara, a leading banker of the day and h e a d o f t h e T a k a s a g o C o r p o r a t e G r o u p . S o m e W e s t e r n buildings constructed in various places after 1868 had been equipped with heaters, but they had all been imported from When the construction industry was lively following World War I, heating companies were founded one after another, becoming involved in imported goods sales battles, while peripheral devices started to be manufactured domestically. In 1927, we constructed the country’s first fully air-conditioned theater Mitsukoshi Hall (currently Mitsukoshi Theater) which was opened in Mitsukoshi Main Store, contributing to the overseas, designed and constructed by foreign engineers. Takasago Ebara turbo refrigerator1943High economic growth era following the postwar reconstructionPrinciples and strategies1970Oil crisis and dramatic changes in business environmentA t t h e s a m e t i m e , l i t h i u m – i o n b a t t e r i e s s t a r t e d t o b e mass-produced domestically. They cannot be manufactured without a low dew point environment. In order to generate The oil shocks of the 1970s shrank construction capital t h i s u n i q u e e n v i r o n m e n t , w e d e v e l o p e d a l o w h u m i d i t y investment, driving the nation into the era of a low-growth environmental control room Dry Room(cid:8060), which is still used to economy. We were also made to change our business policy manufacture lithium-ion batteries.and turned to industrial air conditioning for factories. In 1980, in order to shift to become a profitable company, we stipulated our corporate mission and management philosophy underlying all employees’ attitudes toward our management. By respecting personal harmony or encouraging each person in an organization to act in harmony with the organization’s purposes, we aimed to overcome a severe business environment.Our global business started by opening a Singapore resident office, a Macao branch, and a Hong Kong branch in 1974. W e engaged in the construction of Southeast Asia’s first semiconductor (preceding process) plant and cleanrooms in 2000Optimum operations of HVAC in response to growing global environmental preservation and development of energy-saving technologiesSingapore. Thailand, which had overcome the oil shocks, In response to growing social energy-saving sentiment, Building witnessed a factory investment boom start and was expected and Energy Management System (BEMS), which visualizes to attract plants manufacturing cleanrooms, which allowed us energy consumption of the equipment of a building, drew to found a local joint venture Thai Takasago in Bangkok. attention. In 2005, we developed data gathering analysis creation of an air-conditioned comfortable theater space. The The company was renamed to the current name Takasago Thermal Domestically, demand for air purification or dust-free space software GODA(cid:8060) to keep track of the operational state of an successful installation of air conditioning in the theater led to a Engineering Co., Ltd. in 1943 and the articles of incorporation had been growing in manufacturing sites and medical ones, but HVAC system adequately for its resulting optimum operations. lot of prominent theaters and movie halls following suit.were amended with a presidential system introduced and full-fledged technologies had to be imported from America. By making various data about HVAC systems purchased through Masanosuke Yanagimachi became the first President. We had been engaged in the cleanroom from its early days but different channels of distribution compiled in one database With large construction projects surging during the postwar high had been forced to develop them with no guide available. After for analysis and accessible via the Internet, we were able to economic growth era, we engaged in air conditioner installation World War II, as interactions with overseas were restored, our supervise the operational state of an HVAC system in place of in the Tekko Building No.1 in Yaesu, Tokyo, a symbol of the first company, which had been gathering knowledge about new the owner and provide support for advanced system operations. building construction boom. Shortly before the 1964 Tokyo technologies and new products through whatever opportunities, We also developed a Swirling Induction type TAKASAGO Olympics, the nation went into the second building construction constructed our first full-fledged cleanroom Nihon Denso HVAC System SWIT(cid:8060) to improve the comfort level of the living boom centered on metropolitan areas. When it was determined cleanroom research building in 1968. We went on developing environment in large spatial facilities like factories, which also that the 40-storied World Trade Center Building would be and promoting new and different technologies represented by enabled improvement in energy-saving performance and a constructed in Hamamatsu-cho, Tokyo, as the country’s second the cleanroom with various industries growing during the era of reduction in system costs.skyscraper, we participated in the project as the administrative high-economic growth.Mitsukoshi Hall (currently Mitsukoshi Theater)1930Development of the first domestically-produced productagent of the HVAC consortium. To handle our first skyscraper p r o j e c t , w e p r e p a r e d t h e construction plan of over 500 p a g e s , w h i l e d e v e l o p i n g c o n s t r u c t i o n t e c h n o l o g i e s suitable for a skyscraper. This method became a model for 1989Technological advancement along with industrial developmentFrom an environmental engineering company to an environmental creator(cid:8060)Since 2008, with the Kyoto Protocol in action, among others, 2010Large air conditioners of the day had not been domestic and s u b s e q u e n t s k y s c r a p e r s Entering the 1990s, the liveliness of the DRAM semiconductor achieving a low carbon society has been taken as a matter of were very expensive because of transport expenses and construction. In the following market raised demand for semiconductor plants construction urgency. engineers’ travel expenses added to the price of the main body.y e a r a f t e r t h e W o r l d T r a d e and we, as a pioneer in cleanroom construction, participated in As illustrated in ESG and SDGs, we recognize that companies M a s a n o s u k e Y a n a g i m a c h i , f u t u r e fi r s t P r e s i d e n t o f t h e Center Building was completed, a lot of projects. They were characterized by demand for are required to make further environmental efforts. Takasago Thermal Engineering Co., Ltd., developed the first w e p a r t i c i p a t e d i n t h e technological advancement coupled with their outsized scale We have been working on technological development of d o m e s t i c a l l y – p r o d u c e d p r o d u c t T a k a s a g o E b a r a t u r b o construction of the Keio Plaza and product miniaturization and we founded the Advanced hydrogen, which is viewed as next-generation energy, since r e f r i g e r a t o r a f t e r y e a r s o f r e s e a r c h . A p p r e c i a t e d a s Hotel in Shinjuku, a 47-storied C l e a n r o o m T e c h n o l o g y G r o u p a n d t h e I n d u s t r i a l A i r 1996. In April 2020, we released a water electrolyzer system epoch-making in the construction industry of the day, the skyscraper hotel.Conditioning Supervisory Department to provide more value generating hydrogen Hydro Creator (cid:8060), making efforts for the than customers needed.expansion of its practical use.product was mass-produced for large facilities including department stores and spinning factories.World Trade Center Building13TAKA SAGO COR PORATE REP ORT 202 1TAK AS AGO CO RPOR ATE R EP ORT 202114Value Creation ModelValue creation processTakasago Thermal Engineering Group aims to create comfortable and optimal environments in all types of space, promote environmental contributions as an environmental creator(cid:8060), create an environment the earth and people need, and realize sustainable growth creating new values.Basic policies forthe medium-termbusiness planR&DPlanning/designRenewalTechnicalcapabilitiesQualityOrderreceipt●Sophistication of existing technologies and their horizontal development on a global scale●Development of new technologies and new construction methods●Research and development for the use of renewable energy●Exploration of businesses in new fields based on advanced technologies●Provision of comfortable spaces of the highest quality●Reform of the construction process for productivity improvement on site●Establishment of robust partnerships with partner companiesMaintenanceCustomerresponsivenessHumanresourcesOperationalimprovement●Creation of new customer value with solutions●Provision of proposals and designs that meet customer demand and also exceed their expectations●Strengthening of the relationship of trust with customers●Further improvement of engagement●Human resource development and skill development●Establishment and dissemination of a code of conduct●Promotion of diversityProcurementMaintenanceConstructionAction guideline TakasagoWayManagement philosophyCorporate missionInputManagement resources thatsupport the value creationIntellectual capital (non-consolidated)Number of patents we own(As of the end of March 2021)746Number of the awards given by the Society of Heating, Air-Conditioning and Sanitary Engineers of Japan127Number of qualified employees (in each division)Professional engineer38Qualified person for energy management 179First-class architect451,176First-class plumbing work supervisor* Current employees as of March 2021Financial capitalTotal assets271.1 billion yenShareholder’s equity 132.1 billion yenEquity ratio48.7％(As of the end of March 2021)Social capitalCumulative income from completed constructionapprox. 8.6 trillion yenKowakai* member companies1,831Human and organizational capitalNumber of Group’s employees5,890(As of the end of March 2021)Global networkDomestic business sites29 offices in 11 countries59Natural capital (non-consolidated)Energy consumption(crude oil equivalent)389,319 kl* Kowakai was organized with our partner companies as the members in 2003 to enhance cooperation w i t h t h e p a r t n e r c o m p a n i e s w o r k i n g o n t h e c o n s t r u c t i o n s i t e s . T h e o r g a n i z a t i o n s h a r e s i n f o r m a t i o n o n q u a l i t y , h e a l t h a n d s a f e t y , environmental conservation and other subjects of management with Takasago Thermal Engineering and also gives such information to the members to ensure proper management.15TAKA SAGO COR PORATE REP ORT 202 1ssenisub tnempuqe yraniliipcsid-itlum asessenisub eroc driht dnaotni noitulove ydaetSdnoces eht fo tnemhsilbatsEtnemegagne fo tnemevorpmi rehtruFPrinciples and strategiesOutcomeNew value creationIntellectual capital●Improvement in environmental technologies that help realize a low carbon society or recycling-oriented society●Strengthening of the structure for innovation (open innovation)●Reform of the construction processFinancial capital●Enhancement of medium- to long-term shareholder value●Dividend per share56 yenSocial capital●Strengthening of the relationship of trust with Kowakai and stakeholders●Contribution to the solution of local communities’ challengesHuman and organizational capital●Development and production of employees with advanced expertise●Improved job satisfactionNatural capitalReduction in environmental impact28,044 t-CO₂Sum of reduction shared as a significant reduction example in CO₂ subcommitteeOutputAchievementsfrom business activities●Provision of comfortable spaces friendly to peopleAir conditioning aimed at the preservation of people’s health and the creation of a comfortable living environment in various spaces●Environment for the manufacturing of high-quality productsProvision of a highly controlled production process environment where cleanliness, temperature and humidity are controlled such as cleanrooms and Dry Room(cid:8060).●The most advanced energy-saving operationProvision of optimum total facility management and solutions to customers’ problems (Eco-Tuning, energy saving)●Technologies that contribute to the global environmentCreation of solutions that help solve social challenges by applying the technologies we have acquired to new areasResults in FY2020●Consolidated net sales: 275.1 billion yen●Consolidated ordinary income: 13.9 billion yen●ROE: 8.0%●Consolidated dividend payout ratio: 30.0%●Dividend per share: 56 yen●Bond rating (JCR): A(non-financial information)●CO₂ emissions reduction(from FY2019)▲19.9% reduction(Scope 1 and 2)▲19.3% reduction(Scope 3)TAK AS AGO CO RPOR ATE R EP ORT 202116Message from CFOPrinciples and strategiesWe will promote optimal capital allocation and positively visualize non-financial values for the improvement of medium to long-term corporate valueYoshiyuki HaraDirector and CFOWhile FY2020, which was the first fiscal year of the cars in particular. We view urban redevelopment medium-term business plan, recorded decreased projects as steadily profitable as well for a while. s a l e s a n d p r o fi t s o w i n g t o a l o w d e m a n d f o r We were forced to make major modifications to the construction work and lingering effects of the new medium-term business plan due to the COVID-19 COVID-19 pandemic, among other factors, we were pandemic. The plan, released in November 2020, able to secure a ratio of operating income to net advocates strengthening of management infrastructure sales equivalent to that in FY2019, when record-high and sets sales of 325 billion yen, ordinary income of income was achieved. This resulted from our focus 20 billion yen, 10.0% or higher ROE, a 10% or more on order-taking activities in view of profitability of reduction in CO₂ emissions (Scope 1 and 2) from projects and early determination of construction FY2019 as KGIs. plans, among other things. When it comes to the We will raise the industrial ratio and renewal ratio in order-taking environment, price competition is order-taking and sales to enhance profitability, and becoming more intense, but large-scale investment is reform the construction process, promote DX, and being made in industrial fields in response to growing advance efforts for business creation for strengthening demand for semiconductors for communications and of management infrastructure, one of the plan’s cores.Approach to medium- to long-term improvement in corporate value and financial and capital strategy1.Growth investment and pursuit of improvement go on doing so flexibly, giving comprehensive in corporate value through shareholder returnsconsideration to the market environment, capital In order to realize a stable 10% or higher ROE levels, business environment, and other factors. Of specified in the medium-term business plan, it is the 60 billion yen of investment specified in the important to pay attention to the harmony between current plan, when it comes to growth investment, growth investment and shareholder returns to carry we will select carefully those projects possibly out optimal capital allocation. Concerning dividends, leading to expansion of future business fields or we have changed our dividend policy so that we will profits. With risks of any kind taken into account, we not decrease the dividend during the current plan will prepare a capital cost-conscious investment and increase it according to growth in profits. When adoption standard so that we can take on such it comes to the acquisition of treasury stock, we will projects that help improve corporate value. Review of FY2020 and future outlook● Trends in total amount of dividends, purchase of treasury stock, and total return ratio(million yen)14,000Total amount of dividendsPurchase of treasury stockTotal return ratio12,00010,0008,0006,0004,0002,000054.0％60.3％38.5％31.2％3,0004,00090.4％6,0003,6933,8033,9763,9323,93920172018201920202021 (forecast)(FY)2.Pursuit of capital efficiency with emphasis receivables, which we believe will contribute to on cash flowc o r p o r a t e v a l u e c r e a t i o n i n t e r m o f i m p r o v e d We will enhance profitability in the main business by profitability in the main business and reduced strengthening management infrastructure, the core capital costs.of the medium-term business plan, and focus on When it comes to shares held for policy purposes, strengthening cash flow by improving the cash we have shifted to the policy of not owning them in conversion cycle (CCC). Because the construction principle unless doing so is useful for sustainable industry is characterized by huge differences in the corporate value improvement and will consider balance sheet by season, we will raise capital selling them if there is no significance found in efficiency and control cash levels by carrying out owning them as a result of the Board of Directors’ flexible borrowing or increasing the liquidity of assessment, among others.17TAKA SAGO COR PORATE REP ORT 202 1TAK AS AGO CO RPOR ATE R EP ORT 202118Message from CFOPrinciples and strategies(Issues)Number of issuesNumber of stocksTotal sum posted on the balance sheetMessages from outside analysts ● Cash flow and net cash at end of year in the past 5 years, by yearCash flow from operating activitiesNet cashFree cash flowCash flow from investing activitiesCash flow from financing activities41,02938,43538,61338,61325,85725,85723,5282,329-6,0796,1707,107485485-5,68514,8928,8238,82315,33215,332-8,187-6,369-4,199-6,069 -7,928-14,556-14,55632,33832,33822,24422,24422,56822,5683,6423,642-324-3242017.32018.32019.32020.32021.3Number of issues and stocks we own for purposes other than net investment and total sum posted on the balance sheetCategoriesFYFY2015FY2016FY2017FY2018FY2019FY2020Number of issues(issues)127119116112110105Number of stocks(thousand stocks)30,08326,02822,73421,59219,54717,357Total sum posted on the balance sheet(million yen)35,03734,79637,54533,68626,13029,87935,03734,79637,54533,68630,08312726,02811922,73411621,59211226,13019,54711029,87917,357105FY2015FY2016FY2017FY2018FY2019FY2020(million yen)60,00040,00020,0000-20,00012080400Active approach to improved non-financial value for decarbonization and ESGThe medium-term business plan positions ESG as When it comes to CO₂ emissions reduction (Scope 1 the foundation of business: environmental creator(cid:8060) benefitting the earth (E); further improvement of engagement of the employees, the greatest asset (S); and advanced governance (G). Under the ESG Promotion Committee chaired by President and and 2), a KGI, in addition to aiming to achieve a 10% or more reduction (from FY2019) during the period of the current plan, we have set a 27.5% reduction as the numerical target by FY2030, including the indicator in the performance assessment of the Representative Director COO, which was newly formed r e m u n e r a t i o n o f e x e c u t i v e s a s a n o n – fi n a n c i a l in FY2020, we have established subcommittees for indicator. CO₂ reduction, engagement promotion, and diversity We will engage in further improvement in corporate promotion to focus on the solution of ESG-related value as an environmental creator(cid:8060) by actively focusing important social issues. In addition, we have embarked on non-financial factors for realizing a low-carbon on the development of FP&A specialists, who make society as well as enhancing the main business up global companies in the West, for advanced c o m p e t i t i v e n e s s t h r o u g h s t r e n g t h e n i n g o f management control.management infrastructure.Promoting a positive cycle of corporate value enhancement through constructive dialogue with investors and analysts in terms of financial and non-financial point of viewWe belatedly began to engage actively in IR a few we are the master will lead to the diversification of years ago and, in addition to regular IR meetings, o u r b u s i n e s s p o r t f o l i o a n d e n h a n c e m e n t o f met with a lot of investors and analysts from home competitiveness we are pursuing. and abroad individually and spoke to the press in In addition to promoting understanding of our the last fiscal year. With a PBR ratio greater than 1, business through active engagement in IR and the surplus can be seen as non-financial value and constructive dialogue with investors and analysts, given non-financial values such as technological we will advance a healthy constructive dialogue accumulation, technological development for the cycle of sharing in-house what market players future, and intellectual property we have attained want us to do and in turn reflecting them in the as a pioneer in HVAC, we believe that further next business plans and action plans. We will go corporate value enhancement is fully feasible.on promoting a two-way communication with an While the HVAC business accounts for much of sales at emphasis on transparency and fairness and your present, we believe that our transformation into an candid comments would be appreciated.e n v i r o n m e n t a l c r e a t o r (cid:8060) t h r o u g h e n e r g y – s a v i n g technology or energy management technology of which Hiroki KawashimaEquity Research Team, SMBC Nikko SecuritiesRyo YagiInvestment Research Division, Mitsubishi UFJ Morgan Stanley SecuritiesT a k a s a g o T h e r m a l E n g i n e e r i n g h a s b e e n appreciated as a company representing the HVAC industry in the stock market. In the construction sector with the general contractor at the top, demand for industrial air conditioning for manufacturers in particular is relatively high and the industry tends to gather business attention at the recovery stage of business cycles. As ESG and SDGs become more universal, responding to major issues including global climate change is required and the company is expected to transform itself from a leading d o m e s t i c a i r c o n d i t i o n i n g b u s i n e s s i n t o a multi-disciplinary equipment business covering electricity, hygiene, and instrumentation. Just generating stable income does not lead to the stock market’s satisfactory judgment. The company is credited with carrying out the total r e t u r n p o l i c y a h e a d o f l e a d i n g g e n e r a l contractors, but I hope for the company’s further capital efficiency improvement.Takasago Thermal Engineering, as a leading company in the HVAC industry, makes its presence felt both in industrial and general air conditioning, but I am interested in industrial air conditioning in particular, which is relatively profitable. In industrial air conditioning, I see strong demand for the semiconductor and electronic parts industries at home and abroad as business opportunities and at present, the demand is steadily met.On the other hand, seeing construction staffing living up to the strong demand at home and order increase from abroad as the key to further growth, I pay attention to what measures the company will take. The company, in addition to pursuing further growth as an equipment company focusing on air conditioning, is enhancing hydrogen and space technologies contributing to decarbonization and the environment as an environmental creator(cid:8060) to further improve corporate value. I am looking forward to their future growth.19TAKA SAGO COR PORATE REP ORT 202 1TAK AS AGO CO RPOR ATE R EP ORT 202120General equipment constructionIndustrial equipment constructionOverseas salesMaintenance salesOverseas sales and maintenance salesCO₂ emissions and reduction rate (Targets for applying for SBT and results in FY2020)(100 million yen)6004734734773,1983,2082,89969672,7512,60272878861,0131,1831,251591,1811,6281,6281,8131,8131,9461,9461,8891,8891,5111,511338343Scope 23,110217228236250241Financial andnon-financial performancesFinancial performanceNet Sales(100 million yen)3,500Facility and equipment sales, etc.3,0002,5002,0001,5001,00050002001501005003,0002,0001,0000500400300200100012080400(Yen)806040200863620162017201820192020（FY）20162017201820192020（FY）Ordinary income and net sales to ordinary incomeNet income attributable to parent company’s shareholders and return on equity（ROE）Ordinary incomeNet sales to ordinary incomeNet income attributable to parent company’s shareholders(100 million yen)2506.0％6.0％6.0％6.0％5.7％1831921745.1％5.1％1395.2％134Return on equity (ROE)(100 million yen)1608.2％10.3％10.3％10.4％10.4％10.8％10.8％1321261261188.0％8.0％10120162017201820192020（FY）20162017201820192020（FY）Total assets and return on assets (ROA)Annual dividend per share and payout ratioTotal assetsReturn on assets (ROA)Annual dividend per sharePayout ratio(100 million yen)4,0007.0％ 6.8％6.8％7.1％7.1％5.2％5.2％30.6% 31.2% 30.0%30.0%38.5%2,6402,7972,6562,711505256565.9％2,33420162017201820192020（FY）20162017201820192020（FY）Principles and strategiesNon-financial Highlights* Figures are rounded down to the nearest unit.Results in 2019（t-CO２)Annualreduction rateResults in 2020（t-CO２)From the 2019levelResults in 2030（t-CO２)From the 2019levelScope 11,244△2.5％△19.9％△27.5％1,0452,4429012,255Scope 34.96 million△1.23％4.00 million△19.3％4.29 million△13.5％* The emissions and reduction targets mentioned above are on a non-consolidated basis (Takasago Thermal Engineering alone).Engagement of employees (work style reform, work-life balance and health and productivity management are on a non-consolidated basis)●Number of employees●Work-life balance●DiversityNon-consolidated2,116Consolidated5,890●Work style reformTotal annual working hours per person (unit: hours)2,307.7Percentage of annual paid holidays taken58.0%Number of persons who took childcare leaveTotalWomenMen4421*23Rate of return to work after childcare leave100%* Among them, 18 persons took a leave of one week or less.●Health and productivity managementPercentage of those who had a health checkupComprehensive health risk (Note)100%90Number and ratio of female employees* (excluding fixed-term employees)Number and ratio of newly employed female employees in fiscal 2021Number and ratio of female employees who are candidates for managers *1347（16.1%）22（25.9%）15（4.3%）Number of managers appointed from among local staff *2Employment rate of people with disabilities3592.48％(Note) The comprehensive health risk is calculated by HOKENDOHJINSHA INC., a company that implements stress checks.The average is 100 and a lower value indicates that the risk is lower.*1 Ratio of deputy managers to all employees*2 The above-mentioned figures are on a non-consolidated basis except for the number of managers appointed from among local staff.* As of the end of March 2021Research and developmentNumber of patents(non-consolidated)746(as of the end of March 2021)Research and development costs(consolidated)890 million yen(fiscal 2020)21TAKA SAGO COR PORATE REP ORT 202 1TAK AS AGO CO RPOR ATE R EP ORT 202122FY2020 HighlightsPrinciples and strategiesApril 2020 Formulation of work style reform promotion slogan “Find New Way: Let’s Create a Happy Way of Life Together”Thai Takasago was awarded a contract for the project of Thailand’s first pilot plant for semi-solid lithium ion batteries.We increased the production of clean booths BARRIFLOW(cid:8060)Ⅲ and BARRIHOOD(cid:8060) for medical use to address the COVID-19 pandemic.August 2020 Conclusion of a comprehensive collaboration agreement with Tsukubamirai City, Ibaraki PrefectureWe are working together in the fields of education, disaster prevention, community, and energy for a local community’s sustainable development.Subscription to a third-party allocation of new shares by ispace.As a corporate partner of HAKUTO-R, which is a commercial lunar exploration program operated by ispace, we are engaged in order to strengthen a space business development partnership.We started to use LIMEX, a new material whose prime ingredient is limestone for safety signs in construction sites. We distributed to all employees eco bags made of surplus former uniforms, replacing the paid plastic bag service. September 2020 For the third accelerator program partner, we selected Hmcomm Inc., which is engaged in the development of techniques to detect abnormal noises in building facilities with AI.We approved the recommendation of the Task Force on Climate-related Financial Disclosures (TCFD) and joined the TCFD consortium. October 2020 November 2020 Takasago Thermal Innovation Center won the highest rating S of “CASBEE Wellness Office”CASBEE Wellness Office is a certification system initiated in 2019 by the Institute for Building Environment and Energy Conservation, designed to assess the extent to which a building’s specifications, performance, and environmental commitment help maintain and improve the building users’ health and comfort.Development of the new medium-term business planWe developed the new medium-term business plan “iNnovate on 2023 go beyond! ”(FY2020 to FY2023), the final step of the long-term management framework “GReeN PR!DE 100,” which had been launched towards our 100th anniversary in 2023.December 2020 We donated the anti-coronavirus HVAC booth for disaster shelter to Tsukubamirai City, Ibaraki Prefecture. February 2020 The Kyoto Station Building thermal source HVAC renewal project won the 2021 First Place ASHRAE (*) Technology Award* American Society of Heating, Refrigerating and Air-Conditioning Engineers23TAKA SAGO COR PORATE REP ORT 202 1TAK AS AGO CO RPOR ATE R EP ORT 202124 ESG and SDGspromotion organizationsCommitment to ESG●ESG promotion organizational chartand know-how developed over ages. ■Intensive deliberation with the 3 subcommittees installedsteady steps. With approaches to ESG and SDGs promoted through all business activities, we aim to achieve a good balance between contributions to the solution of social issues and innovation creation, as well as operational and work style reforms.ESG promotion organization ■Installation of the ESG Promotion CommitteeWe installed the ESG Promotion Committee in April We may install subcommittees affiliated with the 2021, an expanded version of the conventional CSR committee for issues to focus on so that they can be committee, to position approaches to ESG and SDGs addressed relatively quickly with company-wide at the core of business activities and promote them. knowledge.The ESG Promotion Committee, chaired by President and Representative Director COO, consists of inside directors, Chief Executive Officers of each Headquarters, and General Managers as the committee members, subject to the Board of Directors’direct instructio