Top message Tackling social challenges head-on with an eye to the global context How our collective diversity of strengths can transform the Japanese housing sector

The dynamism of the world,on full display at COP24

Japan is currently dealing with myriad social challenges: falling birthrate and aging population, climate change, large-scale natural disasters, and increasing numbers of unoccupied houses, to name a few. As a Japanese company, we at the Sekisui House Group have to address the challenges through our business pursuits and keep on growing amid the adversity. We also need to make steady, step-by-step progress on efforts to solve the problems at hand. One of the most pressing issues is the state of the environment. With typhoons, torrential rains, and other large-scale natural disasters wreaking havoc around the world at a startling frequency, extreme weather is quickly becoming an everyday occurrence-disaster could strike anywhere, any time. The prevailing discourse on global warming frames the environmental threat as an issue for the "future of our planet," a concern for the "next generation." That future, however, is now; the effort to control global warming simply cannot wait. The risks are real and present today, imperiling the world we inhabit at this very moment. The need for action is an urgent one.
At the 24th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP24) in Katowice, Poland, in December 2018, I gave presentations on Sekisui House's net-zero energy housing (ZEH) and other initiatives. As I took in my surroundings at the event, I got a real sense of how dynamically the global community is taking action. Countries around the world are tackling climate change in so many practical, progressive ways, but Japan is starting to fall behind. A look at the Climate Change Performance Index, a report that a leading international NGO releases at yearly COP meetings, shows that Japan sits in the "Very Low" rating category. At the top of the list, meanwhile, are Sweden, the United Kingdom, and other European nations; India is one of the higher-performing Asian countries on the list.
Up until the mid-1990s, when the Kyoto Protocol was adopted, Japan was a world leader in the movement to cut greenhouse-gas emissions. Sekisui House blazed trails, too, releasing its "Environmental Future Plan"-a bold vision for a housing manufacturer-in 1999. Things have changed dramatically in the two decades since. I recognized our mission as a housing manufacturer and knew that we needed to accelerate our efforts with a real sense of urgency.
In 2008, the Sekisui House Group announced its "2050 Vision" aiming to eliminate CO2 emissions from housing and quickly shift management focus to decarbonation. ZEH currently accounts for 79% of our newly built detached houses, with total cumulative sales of roughly 40,000 units-both world-leading figures. In October 2017, we became the first construction company in Japan to join the RE100 initiative, a commitment to using 100% renewable energy for all business activities. With the purchase period under the Japanese government's feed-in tariff (FIT) system for renewable energy gradually drawing to a close, we are also planning to launch the "Sekisui House Owner Denki" in November 2019. This is a framework through which we buy surplus power from home owners at competitive prices and use the electricity for our group activities. Countries and corporations abroad are setting ambitious numerical targets and timelines for renewable energy, embodying a dynamic attitude. Japan has to be in the thick of it all. For Japan to do its part amid that constant rush of activity, climate-change countermeasures in the housing sector can play a crucial role. Now is the time for the Sekisui House Group to showcase its true value. Having balanced industry-propelling advances in low-carbon technology and comfortable living, we are in prime position to seize business opportunities and drive further progress forward.

Tackling social challenges through stronger group solidarity

The Sekisui House Group has gradually expanded from a foundation in built-to-order housing into a structure encompassing supplied housing, development business, and overseas business. That breadth speaks to what we can do as a housing manufacturer in realizing a sustainable society, which goes beyond just building new ZEH units. We create top-quality housing and do the proper maintenance, remodeling, and renovations to keep the structures performing well-and better-for generations to come. Our mission is to extend housing life, provide long-term support to customers, form markets where housing constitutes a meaningful social asset, and minimize the impact of housing on the global environment, all in hopes of making a circular economy a reality. Vital to that process are the capabilities of the Sekisui House Group-the diversity of strengths that group companies like Sekiwa Construction, Sekisui House Remodeling, and Sekiwa Real Estate bring to the table. From my perspective, synergizing that diversity of strengths will open doors to new business approaches, such as customer-asset management, and pave the way for ongoing growth.
The plethora of existing houses in Japan presents a wealth of new roles and a world of new possibilities for housing manufacturers. In that area, The Sekisui House Group is proactively promoting "SumStock"-an initiative to help customers pass their homes on to the next generation. At the core of the effort is the Provision of Quality Housing Stock Association, which Sekisui House and nine other leading housing manufacturers created as a joint project. Through SumStock, the member companies get access to a housing history database that facilitates the process of evaluating and selling their high-quality existing houses in accordance with clear, well-defined appraisal standards. Besides providing that valuable framework, the Japanese housing market has traditionally followed a pattern of building new houses and selling as many as possible (and then tearing them down when they get old). SumStock, however, is working to invigorate the market for high-quality existing housing to help curb the country's growing numbers of unoccupied houses.
In driving SumStock forward, the Sekisui House Group is leveraging its impressive track record in supplied housing to stand at the industry forefront and accelerate the overall effort.
Social problems are growing more diverse and increasingly complex as we march into the future. In the process of formulating solutions to those changing issues, individual companies and industries can only do so much. Making problem-solving a concerted, society-wide effort hinges on all-encompassing standpoints and bold, revolutionary ideas. Without those radical breakthroughs, new answers will lie out of reach.

Step-by-step progress toward governance reforms

Last but not least is governance reform, a crucial issue for the Sekisui House Group. Our efforts to tackle the six items for strengthening the corporate governance system that we laid out in 2018, the first year of the governance-improvement drive, have made solid progress and a sizable impact. In working toward the establishment of the Management Meeting and transparency and invigoration of Board of Director meeting operations, a new standard process has taken root: the Board of Directors deliberates on matters after the Management Meeting has discussed the topics, with outside officers present to diversify the talks. Forward progress has been made on clarifying directors' responsibilities for the various departments, thereby facilitating the evaluation of Board of Director efficacy-another of the six items. These initiatives are open-ended; there are always improvements to make and deeper levels to probe.
We have also added new efforts to our action plan ensuring independence and strengthening internal checks of chief managers in charge of general affairs, in sales administration headquarters and branches, as well as improving the integrity of branch managers. As we work to enhance training programs and make personnel evaluations more rigorous, we will also strive to foster future branch managers. The whole process will follow the Plan, Do, Check, Action (PDCA) cycle, just like our business activities do. On top of that, we plan to iron out new reform guidelines by 2020.
The Sekisui House Group's corporate philosophy encapsulates our beliefs. Our fundamental philosophy is "love of humanity," and our stance is "truth and trust." Those elements all play into our governance initiatives. Truth, for example, captures the sincere, high-minded morality of integrity that is at the crux of our governance reforms. Trust, meanwhile, represents an interpersonal ideal: connections where individuals can be their true selves, make the most of their abilities, and have that individual worth recognized. "Love of humanity" and "truth and trust"-it all finds expression in how we strive to stay humble, uphold honesty, answer our call with a full heart, want the best for others, and take joy in others' joy. Those philosophical roots form the cornerstones of our governance reforms as well.
Creating new standards with an eye to the world, our goal is clear, but our reforms-and evolution-are still works in progress. As we keep aiming higher, always training our sights on social issues, we continue to march on toward sustainable growth as a company.

Top message Happiness:Our core concept for a bright future of ongoing business growth
Forming business strategies around social impact to create new value and make Sekisui House a leader in ESG management

The turning point of 2020: Charting a new course for sustainable growth into the future

The Fourth Medium-Term Management Plan, rooted in the core policy of building the foundation for the residential-related business toward BEYOND 2020, is set to wrap up in 2019. For Sekisui House, the year 2019 also represents the 60th anniversary of the company's founding. As we move closer and closer to 2020, which could prove a pivotal turning point for Japan as a whole, Sekisui House is constantly fostering innovations to drive sustainable growth and steadily expanding its business scope.
For us, innovation means expanding our strengths in the built-to-order business into non-housing areas and creating value with bold, forward-thinking concepts for housing.
Sekisui House has spent its entire history as a company striving to create safe, secure housing of exceptional quality-shelters for families' lives and property. Since releasing our Environmental Future Plan in 1999, we have concentrated on maximizing comfort and aimed to be a pioneering force in creating environmentally friendly housing. We want to stride onward along that path, translating our vision of "making home the happiest place in the world" into extraordinary housing. Our fundamental philosophy is a love of humanity. Operating from that foundation, we are now delving deeper into realizing customer happiness in a society where people will have a 100-year lifespan. That means creating new value as a partner in nourishing happiness through housing. In August 2018, we began to concretize that vision with the opening of the Human Life R&D Institute: Japan's first-ever corporate research institution to specialize in happiness. Aiming to propose houses where happiness grows the longer you live there, the Institute is a hub of progressive inquiry. In October 2018, for example, we released the "Family Suite" concept model, which draws on institute research to break away from the conventional "LDK" (living-dining-kitchen) concept and propose a new mode of living. We also showcased our brand-new Platform House Concept at CES 2019, the world's largest consumer electronics show, in Las Vegas (US) in January 2019. The Platform House, a conception of home as a platform for happiness, will utilize resident data to foster intangibles like health, connections, and learning through technologies and services that fuse the physical and the immaterial. The concept is moving along the pipeline, nearing its release in the spring of 2020.
Our first initiative centers on health. With health-related services in three areas-emergency response, health monitoring over time, and preventive care-we can provide new value to residents in the forms of houses that make health. Environmental controls and a bevy of sensing technologies will help users monitor day-to-day changes in their physical conditions, enabling early detection of sudden-onset diseases and life-threatening conditions, particularly those with a high likelihood of occurring at home (strokes and heart attacks, for example). By facilitating prompt medical care, our homes will not only help residents live healthier lives on an individual level but also benefit communities through reductions in medical expenses and other social costs. We look forward to forging alliances with outside partners, pursuing research backed by science and logic, and shaping those results into new services with roots in the home-offerings that will broaden our business domains and fuel sustained business growth.

Housing expertise as a difference-maker outside the housing sphere,benefiting communities on multiple levels

In the non-housing sector, we launched a communitydevelopment project. The initiative makes use of resources like our original Flexible β System, which extends design freedom, expands our options for space proposals, and shortens construction times through the use of factory-shipped materials. Building on Sekisui House's prowess in delivering quality physical housing at quick turnaround times, the project also lets our proposal capabilities shine by foregrounding comfort, eco-consciousness, and other elements of the livability expertise we have gained.
An effort along those lines began in November 2018, when Sekisui House joined forces with Marriott International, Inc., a hospitality-focused accommodation provider with locations in 130 countries and regions around the world, to create the Trip Base Michi-no-Eki* Project. With local governments across Japan offering their assistance, the collaboration will open hotels to showcase a "journey through the attractions of each region" and empower roadside Michi-no-Eki areas as travel hubs. The plan is to have 15 hotels in 5 prefectures up and running by the fall of 2020, with nationwide expansion to follow. Sekisui House will offer high-quality accommodation experiences at lodging-only roadside hotels, and guests will visit Michi-no-Eki locations and local establishments for food, shopping, and more. As inbound demand continues to grow, modes of travel-both domestic and international-are bound to diversify. Working in tandem with regional communities will make the Sekisui-Marriott tie-up a palpable force in benefiting people, economies, regional development, and community revitalization.
I look forward to seeing Sekisui House's track record expand in other areas outside the accommodation sphere, as well, including medical facilities, educational institutions, and commercial establishments.

* Michi-no-Eki are highway rest areas where drivers and passengers can take breaks, get information on roads and the local community, buy local specialties at shops, try local eats, and even stay overnight at on-site accommodation.

Stable, balanced business growth abroad

We have now been active in overseas business for nine years since our initial foray in Australia, and we are finally starting to reap benefits in valuable know-how. Business is on a solid trajectory, too, with the debut of our "SHAWOOD" wooden-frame houses in the Australian market and our acquisition of Woodside Homes in the United States. As we take overseas business to a new stage, we will foster our development business and start applying all the environmental technologies, production and construction systems, expertise, and real-estate management fee background that we have amassed. The goal is to use those assets to foster balanced growth in the industry-from development business to built-to-order and supplied housing-from a medium- and long-term perspective.

Nurturing a culture of innovation and communication, two key elements of leading the way in ESG management

To accelerate sustainable growth on a company level, we need to enable growth on an individual employee level. Innovation and communication are our goals in that regard. We want our workplaces to encourage and rejuvenate communication through day-to-day interpersonal contact and free, candid dialogue-key ingredients in cultivating the ideas that spark innovation. Welcoming, open environments lay the groundwork for effective information sharing and, as a result, stronger governance. If we want to make home the happiest place in the world, we need to make our systems, offices, and worksites conducive to happy, healthy work. That effort spans a broad range of activities, including diversity-oriented measures to help women thrive professionally, workstyle reforms, and health management. In September 2018, we instituted a special program that encourages male employees with children under the age of three to take month-long parental leave. Leave gives people time off, of course, but how employees use that extra time is a key factor. If people take those opportunities to spend more time engaging with their families, communities, and others both within and outside the company organization, the resulting value can be extraordinary-and the encounters and discoveries that emerge can even help shape new proposals to customers. With that awareness and a long-term perspective, we will strive to cement our status as a leading force in ESG management.
To keep growing into the future, we need to be a company capable of contributing to society through our business activities. The Sekisui House Group is determined to create new value via business strategies that align with the international community's shared Sustainable Development Goals (SDGs), hold true to our long-standing legacy, and know when to break from convention in favor of fresh ideas. Our initiatives will continue to focus on steady, innovative progress.