SSBJ Sets the Stage for Sustainability Reporting in Japan with New Standards

Key Takeaways

• SSBJ’s Inaugural Standards: The Sustainability Standards Board of Japan (SSBJ) has officially issued its first set of sustainability disclosure standards, aimed at aligning with global frameworks and enhancing transparency in corporate sustainability reporting.
• Three Core Standards: The standards consist of the Application Standard, General Standard, and Climate Standard, focusing on the fundamental requirements for sustainability-related disclosures and climate-related risks and opportunities.
• Global Alignment: These standards are developed to align with the ISSB’s IFRS Sustainability Disclosure Standards, ensuring that Japan’s approach is internationally comparable.
• Future Mandate: The standards are expected to be eventually mandatory for entities listed on the Prime Market of the Tokyo Stock Exchange, reinforcing their significance in Japan’s regulatory landscape.

Deep Dive

The Sustainability Standards Board of Japan (SSBJ) has recently unveiled its sustainability disclosure standards. This marks a milestone not just for Japan, but for the global conversation around transparency in corporate sustainability. The SSBJ, which was established in July 2022 with a mission to develop standards that would align with the global push for clearer, more comparable sustainability disclosures, has now taken a major step forward.

The SSBJ’s new standards come after months of consultations and collaboration, including close alignment with the International Sustainability Standards Board (ISSB) and its IFRS Sustainability Disclosure Standards. For those familiar with the ISSB’s framework, the goal here is to ensure Japanese companies aren’t just talking sustainability, but doing so in a way that can be understood internationally, making their disclosures comparable on a global scale. But as much as the SSBJ is borrowing from international standards, they’ve also tailored these frameworks to suit Japan’s unique business environment.

At the heart of this announcement are three foundational standards:

1. Application of the Sustainability Disclosure Standards (the Application Standard) – This lays the groundwork for companies to disclose sustainability-related financial information. Think of it as the ‘how-to’ guide for preparing sustainability reports that are meaningful and comprehensive.
2. General Disclosures (the General Standard) – This standard delves into the details of sustainability-related risks and opportunities. If you’re a company trying to figure out how to talk about your sustainability efforts in a way that makes sense, this is your framework.
3. Climate-related Disclosures (the Climate Standard) – Climate change is more than just a buzzword in today’s corporate landscape, and this standard sets clear expectations for companies to disclose their environmental impact, focusing specifically on climate-related risks and opportunities.

It’s worth noting that these standards aren’t just ‘suggestions’ – the SSBJ has designed them with the understanding that, in time, they’ll likely become a requirement for companies listed on the Prime Market of the Tokyo Stock Exchange. So, businesses, get ready: these aren’t optional for much longer.

One of the interesting things about the SSBJ’s approach is how it handled the ISSB’s IFRS S1, which is essentially the backbone of sustainability disclosure. Rather than just sticking to one monolithic standard, the SSBJ split the IFRS S1 into two separate pieces: one focusing on the core content about sustainability-related risks and opportunities, and the other focusing on the general requirements for preparing the financial disclosures themselves. The end result? A more digestible framework that doesn’t sacrifice clarity or comprehensiveness.

Yasunobu Kawanishi, Chair of the SSBJ, expressed his gratitude to everyone who provided feedback on the Exposure Drafts, acknowledging that the process was a collaborative one.

“We’ve worked hard to minimize any potential differences between the SSBJ Standards and the ISSB Standards,” he said. “A few differences still remain, but we’re committed to staying flexible and will continue to adapt as we see how disclosure practices evolve both in Japan and globally.”

For now, the standards are available in Japanese, but don’t worry – there’s a handy English-language overview for international readers. And to make things even easier, the SSBJ will soon publish a side-by-side comparison of the ISSB and SSBJ standards, so anyone looking to see exactly how they stack up can do so without too much hassle.

This new set of standards is about more than just ticking boxes for regulatory compliance. It’s about ensuring that Japanese companies are equipped to share their sustainability stories in a way that’s both meaningful and globally recognized. The SSBJ is hopeful that as businesses start applying these standards, they’ll not only help build a clearer picture of sustainability in Japan but also encourage a more consistent global approach to corporate responsibility.

With the backing of the Financial Services Agency, Japan’s securities regulator, and participation in the ISSB’s working groups, the SSBJ is poised to play a significant role in shaping the future of sustainability reporting worldwide. And as companies in Japan begin to adopt these new standards, it’s clear that this is just the beginning of a long journey towards more transparent, more accountable, and ultimately more sustainable business practices.

As Kawanishi put it, “We hope many entities apply SSBJ Standards, and we welcome any feedback from entities that have applied them. This is an ongoing process, and we’re committed to learning and adapting as the landscape evolves.”

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