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The purpose and direction of ESG management

Rather than treating Environment (E), Social (S), and Governance (G) as separate areas of focus, the Sekisui House Group integrates them into its business itself, aiming to create ESG value. That’s why we see ESG not just as a management foundation, but as a source of value—and we promote ESG management that creates a positive impact through our business activities.
　　In an era in which addressing climate change and social issues is directly linked to maintaining corporate competitiveness, we believe promoting ESG management that drives value creation is central to achieving business growth. Through ESG management, we aim to realize the happiness of our customers, society, and employees, while enhancing corporate value and contributing to a sustainable society.

Structure for Promoting ESG Management

To promote ESG management across the entire organization, we have established three subcommittees: the Environmental Subcommittee, the Social Improvement Subcommittee, and the Governance Subcommittee. These subcommittees play a central role in advancing ESG initiatives by working closely with relevant departments and Group companies, both domestically and internationally. They are responsible for planning and implementing initiatives aligned with our material issues, as well as setting and monitoring relevant KPIs on an ongoing basis.
　　Each subcommittee is led by assigned senior leaders and regularly monitors progress on important issues to continuously improve initiatives. Progress on initiatives and identified issues are reported to the ESG Promotion Committee, which provides internal feedback and considers further improvement measures. Furthermore, to ensure that all employees understand and put ESG management into practice, the Company has established internal training programs and systems for sharing information.

ESG Management Promotion Structure (As of February 1, 2026)

ESG management execution structure

To ensure the steady progress of ESG management, the Senior Managing Executive Officer, who is in charge of the ESG departments, assumes overall responsibility for ESG activities across the entire Sekisui House Group and oversees their promotion.
　　Moreover, the ESG Management Promotion Headquarters, established in June 2020, plans, develops, and manages the implementation of Company-wide initiatives related to our core ESG management policies. They oversee these Company-wide ESG management initiatives, gather and analyze information, and communicate insights both internally and externally, taking the lead in advancing our sophisticated ESG management.

To enhance the effectiveness of ESG management, Group has established the ESG Promotion Committee, an advisory body to the Board of Directors. Chaired by the Representative Director, Vice Chairman and Executive Officer¹ and consisting of both internal and outside members with specialized knowledge, this committee promotes ESG from an objective and multifaceted perspective.
　　The ESG Promotion Committee reviews reports on environmental, social, and governance-related activities and evaluates progress on important issues, revising relevant policies as necessary through active discussion.
　The content of the ESG Promotion Committee’s quarterly meetings is reported to the Board of Directors and shared with all employees via the Company intranet, contributing to greater awareness and understanding of ESG throughout the Company.

Guided by our Global Vision, “Make Home the Happiest Place in the World,” we have positioned ESG management as the core of our business strategies, aiming to contribute to a sustainable society as well as the Company’s sustainable growth. The fundamental strategy of ESG management lies in integrating the three aspects of “Environment,” “Social” and “Governance” to generate a positive impact through the Company’s business activities. To that end, we have aligned our long-term vision with the Mid-Term Management Plan, driving our initiatives forward.

Material issues

In 2022, to clarify the mission we should fulfill, the Group reviewed its material issues. In doing so, we identified and assessed issues that are both important to stakeholders and represent significant economic, environmental, and social impacts; deliberated on the long-term challenges and social missions that the Sekisui House Group ought to undertake; and reflected on our historical initiatives to date. We deepened our understanding through discussions at Management Meetings and through the exchange of opinions with various stakeholders, including external experts.
　　In the 1960s, the Group contributed to securing housing during the period of rapid economic growth and elevating the basic performance of housing. Since then, we have been consistently pursuing “safety and peace of mind” and “comfort and environmental consideration” in housing, while working to advance technologies. Recognizing that our efforts themselves are material issues, we have identified three material issues: “Creation of High-Quality Housing Stock,” “Contributing to a Sustainable Society,” and “Diversity and Inclusion” in achieving happiness through housing in the era of the 100-year lifespan.

The Sekisui House Group analyzes the risks and opportunities associated with changes in the external environment. We consider what value we can provide to realize the happiness of our stakeholders, including customers, society, and employees. Based on our three material issues, we establish key themes.
　　In the Sixth Mid-Term Management Plan (FY2023–FY2025), we have set specific initiatives and progress indicators for each key theme, and we continued to promote and manage progress under the ESG management promotion structure.
　　In addition, the Group has been reviewing and refining its material issues through ongoing dialogue with internal and external stakeholders in light of changes in the social environment and the diversification of values. As a result, with respect to the material issues to be applied from FY2026, we will continue to position “Creation of High-Quality Housing Stock” and “Contributing to a Sustainable Society” as priority issues. At the same time, the previously identified material issue of “Diversity and Inclusion” has been reviewed and further developed, and “Fostering a Refined Sense of Beauty and Happiness” has been newly identified as a material issue. This review aims to further clarify the value that the Group should create over the medium to long term through its business activities, based on the Group’s progress in creating social value through homebuilding since its founding. Under the Seventh Mid-Term Management Plan (FY2026–FY2028), we will place these material issues at the core of our initiatives and, under the newly established basic policy for ESG management, “Become a leading company in ESG management creating new value,” further advance ESG management and pursue the sustainable enhancement of corporate values.

With sustainability at the core, the Group analyzes medium- to long-term challenges that could affect value creation, identifies risk factors, and positions risk as an opportunity for future business creation, leading to the formulation of medium- to long-term business strategies. The progress and challenges of ESG management initiatives are examined by the ESG Promotion Committee, an advisory body to the Board of Directors, and then reported to the Board of Directors. The Board of Directors receives reports from the ESG Promotion Committee and deliberates and supervises the Group’s sustainability-related initiatives.
　　Furthermore, matters related to operational risks and hazard risks are appropriately shared with the Risk Management Committee, which is also an advisory body to the Board of Directors, and are examined and managed within the Group’s overall risk management structure.
　　For details on risk management related to sustainability agendas—such as initiatives related to climate change, natural capital and biodiversity, human capital and respect for human rights—as well as business risks, please refer to the Annual Securities Report (The 75th Fiscal Year).

The Sekisui House Group has established quantitative non-financial indicators (KPIs) based on its material issues to achieve both social sustainability and continuous corporate growth. Progress is managed and evaluated under the ESG management promotion structure, with revisions made as necessary. In the Sixth Mid-Term Management Plan (FY2023–FY2025), 54 KPIs have been established in connection with our three material issues. These KPIs are positioned not only as tools for performance tracking but also as key indicators that guide the direction of value creation through ESG management. Accordingly, when establishing these KPIs, we utilize the following fundamental policy.

1. Incorporating a double materiality perspective
The Sekisui House Group places importance not only on its financial impact, but also on its impact on society and the environment, setting KPIs aimed at creating both economic and social value.

2. Balancing social impact and corporate growth
With a focus on value creation through ESG initiatives, we emphasize indicators designed to maximize positive impact.

3. Setting KPIs with a focus on stakeholder dialogue
We establish indicators that reflect the expectations of diverse stakeholders—such as customers, partner companies, local communities, employees, and investors—and promote highly transparent information disclosure.

4. Conducting ongoing reviews and updates
KPIs are periodically reviewed and refined in line with societal and environmental changes and developments in the business landscape, promoting the evolution of ESG management.

Materiality management

The Sekisui House Group’s materiality management aims to accurately recognize changes in society and developments in the business landscape, with the goal of maximizing value creation through ESG management. Therefore, the initiatives we promote go beyond risk management. They also focus on enhancing both corporate and social value by closely linking material issues to our growth strategy.

Integrating ESG management into our business strategy

The Sekisui House Group aims to achieve sustainable growth by integrating ESG perspectives into its business strategy. To this end, we have incorporated ESG management initiatives into KPIs and introduced a system to quantitatively assess the results of ESG-related business activities. In addition, the progress and outcomes of the ESG strategy are regularly reported to the ESG Promotion Committee and the Board of Directors, and strategies are reviewed as needed.

Key steps in materiality management

Incorporating KPIs linked to material issues into performance evaluation

To strengthen the effectiveness of ESG management, several KPIs that are linked to material issues are also integrated as ESG management indicators within the framework for evaluating Executive remuneration. This is an important initiative to promote sustainable growth and enhance medium- to long-term corporate value, and a system has been established in which top management takes responsibility for advancing ESG management.

Integrating ESG indicators into the remuneration system for officers

ESG management indicators associated with the remuneration system for officers are selected from among KPIs linked to material issues based on discussions of their priority and approach for target attainment. The key KPIs, inclusive of ESG management measures pertinent to the Performance Share Units (PSU) granted to Executive Officers, are outlined below.

Promoting employee ESG engagement (in collaboration with the President’s Award)

With the goal of enabling all employees to actively contribute to promoting ESG management and in addition to executive remuneration, several KPIs linked to material issues have been designated as ESG indicators for business sites and reflected in the President’s Award system. Some examples of key themes incorporated in the FY2025 President’s Award are as follows.

The Sekisui House Group engages in ESG management that prioritizes the participation of all employees, based on the belief that if each individual proactively considers what value they can create for customers, society, and their colleagues, and takes initiative, it leads to the happiness of all. By internalizing ESG as a matter of personal responsibility rather than merely a business task, and by taking the initiative to put it into practice, we are building mechanisms that enable employees to proactively engage in ESG management. These mechanisms include ESG training programs aimed at raising employee awareness, the Sekisui House Innovation & Performance (SHIP) Awards, and ESG dialogue sessions.

Initiatives to instill ESG management within the Group

The Group continuously promotes both internal and external awareness-raising activities to deepen understanding of ESG management and encourage its practical application. The key initiatives for FY2025 were as follows. Through active dialogue with employees and partner companies, the Group aims to further instill its ESG management by communicating its importance and related efforts.

Holding Value Report seminars

Seminars on the Value Report are held upon request and are tailored to the specific interests and challenges of each business site. These seminars delve into the mindset and initiatives of ESG management and its relevance to each business, providing practical knowledge that supports onsite implementation.
　　In FY2025, seminars were conducted primarily within Group companies, with a total of approximately 4,000 participants. Additionally, some business sites hosted their own independent seminars. Feedback from participants included comments such as, “It was an opportunity to think about what I can do and what we as a company should do,” and “I’ll be using what I learned in future operations,” showing that these seminars serve as learning opportunities aligned with the specific needs of each business site.

Further promoting the use and internal integration of the Value Report

Further promoting the use and internal integration of the Value Report The Group’s Value Report functions both as a communication tool for investors and external stakeholders as well as a key resource for aligning employees with our corporate direction and promoting understanding of ESG management. Accordingly, we are striving for continuous improvement by proactively working to internally integrate the Value Report and conducting quantitative assessments to measure the degree by which it is understood.

Internal utilization of the Value Report

Every year, many Group employees read the Value Report, thus deepening their understanding of the direction of ESG management and related strategies as well as specific initiatives.
　　We have built an environment where employees have easy access to the Value Report through such efforts as automatically adding it to internal apps and holding seminars at business sites. This, in turn, has contributed to fostering a shared internal understanding of ESG management.

Utilizing the Governance Awareness Survey

We conduct an annual Company-wide Governance Awareness Survey to assess employee understanding of the Value Report and the degree to which ESG management has taken root. This survey allows us to measure employees’ comprehension of the direction and specific initiatives of ESG management as presented in the Value Report, as well as analyze how they perceive ESG management in general.

Progress to date and the next stage

The Sekisui House Group’s ESG management, built on the foundation of “ESG management that engages all employees,” is now evolving toward the next stage of “ESG management focused on value creation.”

ESG management that engages all employees

Launched in 2020, “ESG management that engages all employees” was an initiative aimed at having employees internalize ESG as a matter of personal responsibility and transform their mindsets and actions. Through ESG dialogue and the Sekisui House Innovation & Performance (SHIP) Awards, we have fostered a culture that integrates ESG perspectives into daily operations, strengthening our efforts toward achieving both social sustainability and sustainable corporate growth.

ESG management focused on value creation

“ESG management that creates value” will begin alongside the 7th Mid-Term Management Plan (FY2026–FY2028). In this stage, we will continue initiatives related to ESG management that engage all employees while further evolving ESG, generating new value through all business activities, and clarifying the pathways for expanding its impact. By sharing with society the ESG value we create through product and service development, sustainable community-building, and co-creation with partner companies, we believe that our Group’s ESG initiatives go beyond risk management and fulfilling responsibilities; they enhance corporate value and drive social transformation.
　　The strengthening of ESG governance will support this evolution. By encouraging cross-departmental collaboration, clarifying KPIs, and strengthening risk management, we aim to further promote the integration of ESG into our business and drive sustainable growth.

Further strengthening governance for ESG management

We aim to fully integrate the Group’s ESG management into our business, create value through all business activities and further expand our efforts regarding it. Maximally drawing out ESG value involves more than responding to changing social issues and the rising expectations of stakeholders; it also involves adopting a cross-functional perspective on ESG and strengthening our integrated promotion structure. This, we believe, is key to advancing effective ESG management.

Integrating ESG into management and strengthening decision-making

We incorporate ESG as a key element in sustainably improving corporate value and are advancing initiatives to reflect it in management decision-making. Through the formulation of the Mid-Term Management Plan and discussions within the ESG Promotion Committee, we are advancing efforts to assess long-term ESG-related risks and opportunities, and have built a framework for strategic engagement.
　　Moreover, in response to tightening global regulations and rising societal expectations, we are strengthening our governance structure to ensure appropriate management of ESG-related risks and opportunities, thereby supporting sustainable value creation. This will enable management decisions to be made in terms of both short-term measures and a longer-term outlook.

Strengthening cross-departmental collaboration

To promote ESG management across the entire Company and maximize its impact, Company-wide collaboration and an integrated approach are essential. Accordingly, the Group has established three subcommittees: the Environmental Subcommittee, the Social Improvement Subcommittee, and the Governance Subcommittee. While these subcommittees have all advanced initiatives in their respective areas of expertise up to this point, closer collaboration will be required to generate synergies moving forward. In particular, it is important for each subcommittee to not simply advance on their own; they must strengthen efforts to integrate ESG into all business activities and aim to create more consistent value. For example, we aim to establish frameworks where environmental measures also contribute to higher social value, and where strengthening governance directly leads to improved transparency and greater competitiveness in our business.

Prioritizing KPIs

The Sekisui House Group is further refining and integrating its KPIs as part of its evolving ESG management. Specifically, KPIs are categorized into two phases: the value creation phase, which concerns direct business activities and process improvements; and the impact expansion phase, which measures the broader effects of these efforts on society and the environment. Each KPI’s pathway toward social impact and enhanced corporate value is clearly identified. In addition to serving as measurement indicators, we organize our KPIs from the perspective of impact creation, and have begun reviewing them in line with the three key elements that drive us toward becoming a leading company in ESG management.
　　These initiatives not only align our KPIs with the evolution of our ESG management, but also give us the chance to review outdated indicators and focus our resources on the KPIs that require the most attention. In the 7th Mid-Term Management Plan, which will begin in FY2026, we will aim to create clearer impacts, set new KPIs and strengthen the integration of business strategies and ESG.

Enhancing risk management

Appropriate risk management is indispensable in advancing ESG management. As ESG-related risks—including climate change, supply chain transparency, and human capital management—continue to diversify and become more complex, there is an increasing demand for stronger responses to global challenges. In addition, ESG risks are closely connected with financial and business risks. Accordingly, strengthening the framework for long-term risk management and the integrated management of risks and opportunities is essential.
　　With our ESG management promotion structure at the core of our efforts, we aim to improve the precision of risk analysis and incorporate insights from external experts to advance the sophistication of ESG risk management in response to global risk trends.
　　By further strengthening ESG governance, we aim to make ESG a driving force for enhancing corporate value, and, as such, pioneer new value creation and societal transformation as a leading company in ESG management.