The challenge of creating new value through the integration between sustainability and urban development for people’s lives

Resolve to provide properties with value for the next generation

In fiscal 2025, the Mitsubishi Estate Group reached the midway point of Long-Term Management Plan 2030. Looking back on the progress made in the previous fiscal year, our office, retail facility, and hotel businesses in Japan remained firm, and we achieved a fourth consecutive year of all-time high results. In the Office Business, against the background of intensifying competition between companies to secure human resources, there was a growing need for offices with high-level functions in prime locations, providing a boost to Mitsubishi Estate’s strength. The continuation of robust inbound tourist demand also served as a tailwind supporting growth in the B to C area that includes retail facilities and hotels. In the second half of the Long-Term Management Plan, the investment in prime assets we have implemented to date will enter the phase of returns on our investments. We will further strengthen collaboration between Group companies and advance toward the achievement of our targets.

Despite such steady progress, business continues to face challenges, including labor shortages and soaring construction costs. For the entire industry to remain sustainable, we must also take into account the rising costs faced by construction companies and other partners, and address them by providing added value ahead of the time, achieving high profitability and sharing the benefits with the supply chain. While embracing the changes in the environment as the inevitable, the question is how we ourselves will adapt to these changes.

Even in a situation of uncertainty, our strategic focus of increasing both social value and shareholder value remains unchanged. Under the review of Long-Term Management Plan 2030 announced last May, we reaffirmed our commitment to promoting further integration between business activities and sustainability with “Be the Ecosystem Engineers” set out in Sustainability Vision 2050 at the core of management. Now, one year later, there is no wavering in our resolve.

To achieve the Long-Term Management Plan, we will further strengthen the balance between growth and improving efficiency. As we aim to increase profit and improve ROE, there may be questions about whether sustainability measures will lead to an increase in costs. However, a company that cannot provide things with value for society will never be recognized as having economic value over the long term. In particular, I firmly believe that providing properties with value from the perspective of future generations is the very thing that will in turn increase economic and shareholder value for Mitsubishi Estate, which is engaged in the long-term business of urban development.

Toward the integration of business activities and sustainability

In the review of Long-Term Management Plan 2030, we updated our key themes related to sustainability and defined urban development and services, the global environment, respect for people, and value creation as Sustainability of the Mitsubishi Estate Group and Society: Four Key Themes. In particular, we set out “Seek to provide urban properties and services that can be proudly passed down to the future” as a theme related to urban development and services, and I believe that has made it even clearer that the pursuit of our core business in itself is a means of increasing social value.

It has been a year since the review, and we have made definite progress toward the integration of business activities and sustainability. Each business group has been working to develop concrete goals for strategies to increase social value that are linked to business targets. The discussions of the Board of Directors have also been revitalized as a result of the reports from the Sustainability Committee, and this has had a positive impact on management.

Since last fiscal year we have introduced issues related to the social significance of business into deliberations by the Executive Committee, which makes investment decisions. This fact can also be described as one of the changes we have made. However, this goal has only been half-achieved. I myself have not been able to fully address the question of how it will lead to an increase in social value. We are continuing to explore how to incorporate contributing to increasing social value into investment decisions and the creation of mechanisms for doing it. Our aim is to ask why and present a convincing answer from the perspective of sustainability in all decision making.

Social value and shareholder value are not inherently contradictory. Mitsubishi Estate has been striving to realize environmentally-friendly development since before the demands for companies to address the environment became stronger over the past few years. Looking back even further, the enthusiasm and determination of our predecessors in trying to create a world-standard business center for Japan built the foundations of today’s Marunouchi area. Inheriting this 135-year history, we aspire to be an entity that can meet the expectations of society through our core business activities. Conducting business activities in such an authentic manner will in turn increase social value. It is this kind of virtuous circle that we want each and every employee keep in mind and realize so that it is also recognized by society.

Responding at a more fundamental level to demands around sustainability

Nowadays, the global trends around sustainability are becoming increasingly complex. In terms of the environment, in particular, international standards such as that of the Science Based Targets initiative (SBTi) to which Mitsubishi Estate has committed now require companies to take more concrete and effective initiatives. On the other hand, the reality is that, under real-world constraints such as soaring energy prices and supply shortages, we are observing a trend in various places that could be described as a backlash.

In this environment, I believe it is important for us to calmly assess what we should and can do fundamentally ourselves and then implement it in a sustainable way while monitoring global developments. While keeping in mind the bigger goal of eventual decarbonization, there should be a variety of approaches that suit the circumstances of individual countries and regions.

In particular, the field of electric power is very complex, and there are limits to the issues we can solve by ourselves in terms of energy creation and connection to the power grid. This is why it is essential to continue actively collaborating with external partners that possess extensive knowledge and pushing forward with new initiatives.

Conventional urban development assumes the construction of new buildings. However, if we consider minimizing environmental impact, the effective utilization of existing stock, including renovation and conversion, will also be an important perspective in urban development going into the future. Mitsubishi Estate has been actively involved in renovation projects in and outside Japan, including the large-scale renovation of the Otemachi Building, which was built more than 60 years ago. The development of such projects is also a strength that is unique to Mitsubishi Estate, which brings together the expertise and knowledge of Group companies, including a design company. We take the changes in the social environment as an opportunity for us to update our values and mindset, and will actively meet this challenge.

To be a corporate group that cares for people and is chosen by people

The construction of a sustainable supply chain is also a very important theme. In the area of human rights and environmental issues, we have so far conducted human rights due diligence and a series of onsite interviews and other activities targeting foreign workers at construction and cleaning companies. It is by no means easy to continuously monitor the supply chain in the real estate and construction industries as the locations where materials are procured and produced are not fixed as they are in the manufacturing industry, and human resources and sites are also fluid. The hurdles for such initiatives are particularly high overseas.

Nevertheless, as a leading company, I believe we have a responsibility to continue tackling such issues. We steadily work on what we can do one step at a time and encourage changes in the awareness and behavior of our suppliers through our efforts, thereby aspiring to create a positive cycle to realize a sustainable supply chain.

We also place importance on the promotion of diversity, equity, and inclusion as an initiative that is related to the intrinsic essence of the company. Bringing together diverse human resources and utilizing everyone’s strengths increases the quality of decision-making and enhances the flexibility and ability of an organization to adapt to change. It is essential to create an environment that respects all differences, including gender, age, nationality, values, and presence of disability, and empowers everyone to demonstrate their strengths.
The percentage of women in management positions, which is one of our KPIs for gender equality and women’s empowerment, has been gradually increasing as we have continued to foster the corporate culture for creating a positive working environment for everyone and stepping up recruitment of women, including those with potential for management positions. Mitsubishi Estate is a signatory to the Women’s Empowerment Principles (WEPs), declaring that gender equality and women’s empowerment are at the center of its management.

Recently, attitudes to careers have also diversified, particularly among younger generations. It is becoming increasingly important to establish an environment that enables people to build a career that fits with their own aspirations, rather than having everyone aim for the same goals. In order to continue being an organization that enables diverse human resources to demonstrate their strengths, I also feel the need to reflect on the existing personnel system with an eye to the future. Although there will not be any immediate answers to this issue, the imperative to change is clear. We will steadily move forward toward becoming a corporate group that cares for people and is chosen by people.

Leading the future society through urban development

As society changes at an accelerating pace, it is not easy to see into the future. Recently, while taking part in discussions looking 20 or 30 years into the future, I felt very conscious of the perspective of what the unchanging aspects of human beings are. However much technology evolves, people are beings who cannot live alone but rather go through life maintaining connections with others. I believe that time for people to meet and talk face-to-face will continue to have unchanging value throughout the ages as seen in the renewed focus on interacting in the real world after the COVID-19 pandemic.

There is likely to be diversification in our ideals about places to live and work going forward. It is also possible that lifestyles combining “home” and “work” will become more widespread. However, the role of each space that supports the rhythm of life and human relationships is likely to remain the same despite changing in form. I believe our job in urban development is to increase “A Love for People, A Love for the City” while being closely connected to people’s lives in order to continue providing value in keeping with the times.

Under its mission statement, which is to contribute to society through urban development, Mitsubishi Estate will lead and build the society of the future. With this kind of resolve, we want to continually set ourselves new challenges. Precisely because this is an era of dramatic change, we will engage in urban development rooted in universal human values with the aim of being a company that continues to be trusted by society.