Sekisui House : Section４ ESG Management

Value Report 2023				Contents	Long-Term Vision and	Mechanisms and	Mid-Term Management Plan for
SEKISUI HOUSE				Material Issues	Catalysts for Creating Value	Sustainable Growth

Section

4

ESG Management	Financial Data, Company	93
G: Governance E: Environment S: Social	Information and Share Information

ESG Management

The Outside Members of the ESG
Promotion Committee Share Their Views	94
Stance and Initiatives to Promote
ESG Management (Sustainability)	97
Governance	99
Environment	133
Social	181
Participation in International Initiatives and
Activities with Government and
Industry Groups	219
Independent Third-Party Assurance Report	220

Value Report 2023				Contents	Long-Term Vision and	Mechanisms and	Mid-Term Management Plan for	ESG Management
SEKISUI HOUSE				Material Issues	Catalysts for Creating Value	Sustainable Growth	G: Governance E: Environment S: Social

The Outside Members of the ESG Promotion Committee Share Their Views

Expectations for New Value Creation Initiatives

as a Leading ESG Management Company

As part of our efforts to become a leading company in ESG management, we have established the ESG Promotion Committee, an advisory body to the Board of Directors that holds vigorous discussions. We asked two outside committee members with expert knowledge of ESG issues for their opinions on our ESG-related initiatives up to this point, as well as their future insights on related issues.

Financial Data, Company	94
Information and Share Information

Katsuhiko Kokubu

Dean and Professor, Graduate School of Business Administration, Kobe University

After earning a doctorate in business administration from Osaka City University, he worked as an associate professor at Osaka City University and Kobe University before appointment to his current position in 2001. Dr. Kokubu specializes in social and environmental accounting and business ethics. His major publications include Concept of Value Creation, published by Nippon Hyoron Sha Co., Ltd.; Emergent Responsible Management: A Social Connection Model, published by Nikkei Business Publications, Inc.; From Accountability to Management Ethics, published by Yuhikaku Publishing Co., Ltd.; and The Fundamentals of CSR, published by Chuokeizai-sha Holdings Inc.

From Inception to Present: Reflecting on the ESG Promotion Committee

KokubuAt the time of the formation of the ESG Promotion Committee in 2020, Sekisui House's ESG initiatives were already advanced. However, I wholeheartedly feel that it has made steady progress since then.

• The fact that every single representative director is in attendance for every committee meeting is a good example of the high level of commitment. To my knowledge, it is not common for all representative directors to attend such committee meetings at other com- panies. Sekisui House's activities have reached this unparalleled level because top-level management has taken the initiative to engage in ESG-related activities on a Company-wide basis.
  Tomita I too feel that Sekisui House's ESG activities were already clearly at the top level among its industry peers in 2020. As for the committee's operation, one stand-out feature is that the Directors' seats are set up in the back of the meeting hall. Discussions tend to become formal when management is positioned in the front, but this setup makes it easy for people closer to the front lines of business to speak up.
  KokubuThe fact that the meetings are always full of substance is another good indication of how serious the Company is about its ESG activities.
  Tomita I agree. It's a rare case indeed for a committee to meet with outside committee members every three months, holding dis- cussions for roughly two hours each time. These discussions, including following up on comments from previous meetings, help drive the progress of ESG initiatives.

Hidemi Tomita

Representative Director,

LRQA Sustainability K.K.

After earning a bachelor of science in engineering in applied physics from the University of Tokyo and a master of science in chemical engineering from Princeton University, Mr. Tomita served as general manager of Sony Corporation's CSR Department, following its establishment in 2003, for roughly a decade. He has participated in the establishment of international frameworks for CSR by chairing Communication Task Group 2 in the working group for the formulation of ISO 26000 and by joining the Global Sustainability Standards Board (GSSB). He is the author of Sustainable Procurement in the Age of ESG Investment, published by Nikkei Business Publications, Inc.

Value Report 2023				Contents	Long-Term Vision and	Mechanisms and	Mid-Term Management Plan for	ESG Management	Financial Data, Company	95
SEKISUI HOUSE				Material Issues	Catalysts for Creating Value	Sustainable Growth	G: Governance E: Environment S: Social	Information and Share Information

The Outside Members of the ESG Promotion Committee Share Their Views

I'd like Sekisui House to
" rekindle the spirit of
innovation it had at its
founding and develop new
business models that will	"
lead to ESG value creation.

KokubuThe most concrete change from the committee's inception to date has, of course, been the reinforcement of the concept of value cre- ation. A more realistic perspective on value creation has emerged, and in addition to a greater emphasis on process, ESG value creation is now approached from a similar perspective as existing business processes. I think that the top management team has also exhibited leadership by clearly demonstrating its stance both internally and externally. What do you think? Tomita In terms of leadership, top management's direct participation in the ESG Promotion Committee has created a sense of unity with onsite workers. It is also noteworthy that the direction of the Company as a whole has become clearer and employee engagement has increased through initiatives involving employees, such as the ESG dialogues and the Sekisui House Innovation & Performance (SHIP) Awards Program. This is a significant evolution.

KokubuSomething that particularly stands out from my involvement as an outside committee member is how the Company has incorporated our recommendations and opinions into its actual activities.

• For example, I sometimes speak about the concept of ESG not existing within companies, but rather companies existing within ESG. A staff mem- ber heard this and asked to use the concept within the Company, to which I readily agreed. I have heard that it has indeed been advocated in the ESG dialogues.
• Additionally, the SHIP Awards Program was implemented after we pre- sented cases of emergent responsibility management. As an outside com- mittee member, seeing people resonating with our opinions and acting on them is gratifying and has led me to consider what sort of things we should communicate next in order to contribute to ESG management. Communication has been fruitful on both ends.
  Tomita Even the idea of Sekisui House existing within ESG has been well digested and understood by many at the executive level. Recent thinking is much more precise than when they first established the goal of "aiming to be a leading company in ESG management."
• Another thing is that, during meetings, for example, when I make a com- ment to someone who has made a report, a representative director will sometimes make a comment from a different angle that had not occurred to me before. Having multifaceted opinions expressed from varying per- spectives is a sign of a good discussion.
• The continuation of these activities is bound to produce results. I am very much looking forward to seeing them in two or three years.
  KokubuIt is essential that activities designed for everyone are not forced on participants. Even for those not currently participating, having each per- son consider what they could do is a form of participation in itself. This kind of broadly conceived participation of all employees is desirable. Creating systems in which people can participate when inspiration strikes, and in which they can really feel that they are contributing to the Company and society, is important. Endeavors such as SHIP help lay the groundwork for such systems.

Sekisui House Group's Current Position and Reputation

KokubuThere is no doubt that the Sekisui House Group stands in the top class of ESG management, not only in the housing industry, but also among Japanese companies in general, and I think that external evaluations bear that out. However, given that the Company is in the top class within existing frameworks of ESG management, the next step should be to consider what the future holds for ESG management, and to take on the role of pioneering that future. Getting a perfect score within a certain criteria set is good, but if that's your only focus, you'll never push past the boundaries that define those criteria to new heights.

• If Sekisui House can pioneer ESG initiatives that will change future busi- ness models, then and only then can it call itself a true leading company in ESG management. That the Company has grown as large as it has, without a doubt, comes down to its history of business model innovation. I strongly urge Sekisui House to rekindle the spirit of innovation it had at its founding and to take on the challenge of developing a new business model or two for ESG value creation.
  Tomita The statement of new value will be essential for ESG manage- ment going forward. The "perfect score," to borrow your analogy, is deter- mined based on the best practices of various industry initiatives to date. It would be nice to see Sekisui House step out of that framework and take the initiative to define new standards.
• Of course, efforts are already underway to take initiatives a step further, such as urging suppliers to set targets that will enable them to obtain a Science Based Targets (SBT) validation. While these are meaningful steps, I hope to see more major developments toward a better future.
  KokubuAn easy-to-understand approach to considering new ESG busi- ness models is to solve social issues. Factors such as the rapidly mounting effects of Japan's low birthrate and aging population, along with the result- ing depopulation, have made the increase in vacant houses a major issue. How can Sekisui House, as a housing manufacturer, tackle such issues? At

Value Report 2023				Contents	Long-Term Vision and	Mechanisms and	Mid-Term Management Plan for	ESG Management	Financial Data, Company	96
SEKISUI HOUSE				Material Issues	Catalysts for Creating Value	Sustainable Growth	G: Governance E: Environment S: Social	Information and Share Information

The Outside Members of the ESG Promotion Committee Share Their Views

the same time, widening income disparity is giving rise to more young women living in poverty, and the number of single mothers is growing. How could the Company go about addressing the issue of housing for such people? Developing new business models is of the utmost necessity when it comes to solving these issues. To that end, making full use of a system like SHIP, in which people in the field can present their solution ideas for issues they have firsthand experience with, would be a good idea.

• There are a variety of issues to be addressed, such as the need for busi- ness models that promote employment by utilizing the experience and skills of seniors. Efforts in this arena should prove to be a net positive step for the future.
  Tomita Even when considering net zero energy houses (ZEH), I think the Company is approaching the pinnacle of sustainable housing. Therefore, I hope that in the future Sekisui House can broaden its perspective from "build- ing houses" to "living" and consider ways of living that tackle social issues.
  KokubuFor issues that are difficult for one company to solve, such as decarbonization, it is imperative for everyone in the industry to join forces. If housing manufacturers work together to conduct scenario analyses and apply them to the entire housing industry, their accuracy is sure to be enhanced.
  Tomita In doing so, a possible future approach will be to work not only with other companies, but NPOs and other suitable partners to promote open innovation.
  KokubuI thought it was wonderful when I heard that Sekisui had begun working with local construction companies to implement its own seismic resistance technologies to address the issue of the many homes that still do not meet earthquake resistance standards. As someone who has wit- nessed firsthand the damage caused by the Great Hanshin-Awaji Earthquake, I am keenly aware of the need for seismic resistance technolo- gy. Making some of these technologies available to other companies to promote their wider use serves the interest of Japan as a whole.
  Tomita The supply of many houses with excellent seismic resistance may save many lives in the event of a disaster. In addition, local construction

companies may be able to create new value with the acquisition of know- how. This is a very important initiative that brings us back to the fundamental question, "For what purpose does a company exist?"

• Recently, digital transformation (DX) such as the Platform House Concept has also been advancing. This has the potential to change the meaning and value of living, and now, at a time when the boxes we call houses are approaching their pinnacle, this technology will bring both new value and new meaning.
  KokubuThe Platform House Concept is extremely innovative. In particular, DX can be a source of growth for Sekisui House in the future, and life-sav- ing technologies such as the HED-NetIn-Home Early Detection Network for Acute Illnesses will be extremely significant in daily living in the era of the 100-year lifespan. This platform business is completely different from the previous know-how of housing manufacturers. I hope it will open the door to a new era.

Future Challenges for Sekisui House's ESG Management

KokubuI may be repeating myself, but the issue at hand is the creation of new ESG value.

• For example, while numerical targets such as reductions in CO2 emis- sions or increases in the value of human capital are important, discovering previously unconsidered social value and giving shape to the ESG value generated by Sekisui House as concretely as possible will be a major chal- lenge going forward.
• Generating innovation must be in the very DNA of Sekisui House. By incorporating it into ESG management and preparing many possibilities for the next sprout, real fruit will be borne. This is what is done in ordinary busi- ness. I expect that Sekisui House will be able to innovate based on such ideas in ESG as well.
  Tomita The Company's global vision-to make home the happiest place in the world-is primarily focused on the happiness of Sekisui House's

• The challenge for the future will be for Sekisui House to broaden its perspective from 'making good housing' and more deeply consider ways
  of living that tackle social issues. "

customers, but what I mentioned at the ESG Promotion Committee meeting was the importance of "making Sekisui House, another home for our employees, a happy place."

• I would like to see each and every employee enjoy happiness as they develop their careers. Even if they ultimately leave the Company, I would like to see Sekisui House prove it is the company employees always contin- ue to appreciate as having been a great place to work.
  KokubuThere are more than a few employees at Sekisui House who are involved in ESG activities not only because it is their job, but also because they consider it important as human beings.
• Going forward, increasing the number of such people will be a driving force, not only for the betterment of the Company, but also for the better- ment of society. It is my fervent hope that Sekisui House, as a leading com- pany in ESG management, will nurture people who are willing to take action

regardless of their department.

Value Report 2023				Contents	Long-Term Vision and	Mechanisms and	Mid-Term Management Plan for	ESG Management	Financial Data, Company	97
SEKISUI HOUSE				Material Issues	Catalysts for Creating Value	Sustainable Growth	G: Governance E: Environment S: Social	Information and Share Information

Stance and Initiatives to Promote ESG Management (Sustainability)

1. Governance

management based on discussions at the ESG Promotion Committee. Under this structure, we have identified three key elements for promoting ESG management: participation of all employees, forward-thinking initiatives

ESG Management Promotion Structure

Board of Directors

ESG Promotion Committee

The Board of Directors has established the ESG Promotion Committee, which includes at least two external committee members with special expertise, and has tasked it with exchanging opinions on the progress of initiatives aimed at enhancing the effectiveness of ESG management, along with requisite challenges to be addressed to this end. The committee meets once every three months, with the content of its discussions being reported to and examined by the Board of Directors. When the committee deliberates topics related to risks, its conclusions are shared by the Risk Management Committee so that these topics are reviewed and managed within the Group's overall risk management system.

and improvement of external evaluations. Among these, we consider the participation of all employees a matter of foremost importance and, to this end, we have reorganized our conventional programs for employee dialogue and training into "ESG Basics." These programs now constitute fundamental initiatives focused on developing foundations for ESG management. In these ways, we have developed a platform that encourages all employees to recognize, understand and embrace ESG and act accordingly.

• Also, the Sekisui House Group aims to maximize customer value through its initiatives to address social issues, facilitate social sustainability and contribute to SDGs.

Main Agenda of the ESG Promotion Committee for FY2022

ESG Promotion Committee

Approval

Report

3 ESG subcommittees

E: Environmental Subcommittee		Sales
(Chairperson: Head of Environment Improving Department)
• Decarbonized society  • Society in which humans and		Production and
nature coexist	• Resource-recycling society
	procurement
• Water resources	• Other environmental management
S: Social Improvement Subcommittee
	Head office
(Chairperson: Head of Diversity and Inclusion Promotion Department)
• Promoting Diversity  • Human resource development	Cooperate
• Workstyle reforms  • Respect for human rights
• Happiness Health Management  • Contributing to society		Group companies
G: Governance Subcommittee		in Japan
(Chairperson: Head of Investor Relations Department)
• Fostering an organizational culture to promote		Group companies
innovation and communication
	overseas
• Strengthening the Group governance system

• Chairperson: Officer in charge of ESG division
• Outside committee members: 2
  Katsuhiko Kokubu (Dean and Professor, Graduate School of Business Administration, Kobe University)
  Hidemi Tomita (Representative Director, LRQA Sustainability K.K.)
• Internal committee members:
  Head of the ESG Management Promotion Headquarters, the respective chairpersons and vice chairpersons of the three ESG subcommittees (Environmental Subcommittee, Social Improvement Subcommittee and

Governance Subcommittee), etc.

Note: Directors of the Board, Audit and Supervisory Board members and officers in managing officer positions or higher attend committee meetings as observers.

The ESG Promotion Committee has established three subcommittees, each of which respectively promotes one aspect of ESG: the Environmental Subcommittee, the Social Improvement Subcommittee and the Governance Subcommittee. The chairpersons of these committees are appointed from among individuals in charge of relevant operations, with each subcommittee setting goals and key performance indicators. The subcommittees collaborate with each division and Group companies inside and outside of Japan, and take the lead as flag-bearers of our ESG management principles, while implementing effective initiatives. In addition, the subcommittees disseminate these initiatives and promote their greater understanding among all employees by creating progress reports, providing feedback on issues and proposing improvements to the dissemination process.

• Established in June 2020, the ESG Management Promotion Headquarters acts in collaboration with business units within the Company as well as Group companies in Japan and overseas to further promote ESG

	Schedule	Main agenda
			• Formulation of corporate story and	• Reformulation of Value Creation
8th		March 1	review of material issues	Process
	• Identification of KPIs based on mate-	• Overview of FY2022 response to the
			rial issues	TCFD
			• Pre-issuance reporting on the Value	• Happiness Health Management
			Report 2022	• Beneficiaries of FY2022 Sekisui
9th		May 20	• Reporting on the first round of SHIP	House Matching Program
	and its future direction	• Human capital-driven enhancement
			• Second round of Well-Being Survey	of corporate value and information
	2022		Reports	disclosure
			• Follow-up reporting on progress in the	• Initiatives related to carbon neutrality
			first round of SHIP idea solicitation	• Nationwide rollout of housing educa-
10th		July 19	and policies for screening criteria to be	tion programs
	applied to the second round	• Initiatives to strengthen governance
			• ESG-focused engagement with insti-
			tutional investors
		October	• Mid-term management plan policies	• Initiatives to promote paternity leave
11th		• Progress reporting on SHIP	• Disclosure of human capital-related
	11
			information
			• Editorial policy for the Value Report	• Themes for FY2023 ESG dialogue
			2023	• Status of applications for the second
12th	2023	January	• Draft of human capital-related infor-	round of SHIP and progress in the
17	mation to be disclosed	projects of second-place winners for
		• Results of the Gohon no Ki Project	the first round
			activities and policies for response to
			the TNFD

In June 2020, the Sekisui House Group established the ESG Management Promotion Headquarters to administer the planning, drafting and implementation of the Group's basic ESG management policies. This organizational reform represents a statement of our determination to be a leading company in ESG management, in both name and reality. It will not only promote Group-wide initiatives related to ESG management, but also provide support and coordination, information collection and analysis, and unified information dissemination both inside and outside the Company.

Secretariat: ESG Management Promotion Headquarters

Environmental Subcommittee

We promote the decarbonization of all Group business activities, as well as plan and implement environmental management systems for conserving biodiversity and recycling resources. We also collect environment-related information and disclose this in a report once a year. By doing so, we strive to raise internal and external stakeholders' awareness of the environment and our efforts to reduce environmental impacts. Environmental initiatives are central to our global vision to make home the happiest place in the world. We therefore implement sophisticated initiatives to reduce our environmental impact and risk exposure, while creating business opportunities.

Social Improvement Subcommittee

The Sekisui House Group grows when our employees grow. We therefore embrace and make the most of diversity, while instilling a corporate culture of innovation and communication throughout the Group. Our goal is to maximize the happiness of our customers, society and employees.

• Diversity and inclusion are the practical aspects of our efforts to develop systems, workplace environments and corporate culture supportive of each employee's sense of job fulfillment and self-directed career development.

Governance Subcommittee

In our ongoing efforts to strengthen corporate governance, we consider it important to create an open workplace culture, and therefore we make every effort to ensure all employees understand and act on our corporate philosophy and the essence of ESG management. To strengthen Group governance, we have established a system to activate communication among governance specialists, led by managers responsible for general affairs at each organization in Japan and overseas, and are also working to strengthen the development and conduct appropriate allocation of governance specialists throughout the Group.