SSBJ (Sustainability Standards Board of Japan) published Japan's first three sustainability disclosure standards on March 5, 2025: the Universal Standard, the General Disclosure Standard, and the Climate-related Disclosure Standard. They are based on ISSB's IFRS S1 and S2 while setting application requirements aligned with Japan's regulations and accounting practice. With the February 2026 Cabinet Office Ordinance amendment, mandatory application from the fiscal year ending March 2027 has been confirmed for Prime Market companies with market capitalization of JPY3tn or more. The preparation phase is over; the application phase has begun.
Positioning of SSBJ and ISSB - The Overall Framework
ISSB is an international body established by the IFRS Foundation in 2021 to develop disclosure standards for sustainability information that has a material effect on corporate finance. IFRS S1 (general disclosure) and S2 (climate-related disclosure), finalized by ISSB in 2023, are a central axis of global disclosure standards alongside Europe's CSRD.
SSBJ is the body that applies ISSB standards for Japan under an agreement with the IFRS Foundation. SSBJ standards largely preserve IFRS S1 and S2 while aligning with Japanese accounting standards (J-GAAP) and adding transitional measures for phased application. On March 31, 2026, SSBJ and ISSB confirmed continuing alignment between the two sets of standards. Because investors focus on alignment with ISSB, the effective disclosure requirement level is equivalent to IFRS S1 and S2.
Application Schedule - Phased Mandatory Rollout by Market Capitalization (Confirmed)
The initial discussion often framed the rule as "all roughly 1,700 Prime Market companies from FY2027." What was confirmed is phased application by market capitalization. Under the February 2026 Cabinet Office Ordinance amendment, the basic mandatory schedule is as follows.
JPY3tn or more -> FY ending March 2027
The first mandatory group. As the lead group, these companies begin applying the standards in securities reports for the fiscal year ending March 2027.
JPY1tn to under JPY3tn -> FY ending March 2028
The second wave. The basic policy is to start one year after companies with market capitalization of JPY3tn or more.
JPY500bn to under JPY1tn -> FY ending March 2029 (under continued review)
The basic direction is to start from the fiscal year ending March 2029, while the timing remains under continued review.
Under JPY500bn -> to be considered
Whether and when application will be required remains a future policy question. The first step is to confirm the company's market-cap category and applicable year.
The disclosure destination is the securities report. Disclosure in a securities report under the Financial Instruments and Exchange Act has legal effect, and false statements can be treated as violations of that law. This is the largest difference from CSR reports or voluntary disclosure, and it is why internal controls and external assurance become necessary to secure the accuracy of disclosed content. The sustainability section of securities reports has already existed since the fiscal year ending March 2023, and human-capital indicators such as the ratio of women in management apply from the fiscal year ending March 2026. Even before mandatory SSBJ application itself, the scope of disclosure has already widened.
Third-Party Assurance - "From the Following Year, in Phases" Is Now Confirmed
Third-party assurance is the most labor-intensive part of SSBJ readiness. The system design has become concrete as follows.
Mandatory from the year after application starts
The policy is to require assurance from the year after each company's SSBJ application starts. For a company with market capitalization of JPY3tn or more, the sequence is disclosure for the fiscal year ending March 2027, then assurance from the following year.
Initial two years have limited scope
For the first two years, the assurance scope is limited to Scope1 and 2 emissions plus governance and risk management. The move toward broader coverage and reasonable assurance will be phased.
Assurance providers use corporate registration
Assurance providers will be registered as legal entities, and firms other than audit corporations can also register. This creates an assurance market not limited to audit firms.
Alignment with international standards
Japan's assurance standards emphasize consistency with ISSA5000, ISQM1, and IESSA. Details are covered in the separate FSA and ISSA5000 article.
Main Differences from ISSB Standards
Transitional measures for Scope 3 disclosure
IFRS S2 requires disclosure of Scope 3 (value-chain emissions), but SSBJ standards include transitional measures for comparative information and Scope 3 disclosure in the first annual reporting period. However, disclosure requests from investors and customers are already increasing before mandatory application, so early readiness is realistic for companies with major suppliers.
Flexibility in GHG calculation methods
GHG emissions are generally measured using the GHG Protocol, but Japan also allows methods such as 温対法 (SHK). In June 2026, SSBJ issued Practical Solution No. 1 on using emissions under 温対法 SHK for climate-standard disclosure, clarifying the connection with domestic systems.
Possibility of early application
SSBJ standards can be voluntarily applied from annual reporting periods ending on or after the publication date, so March fiscal-year companies can early-apply from FY2024. Some companies are starting disclosure before mandatory application.
Connection with accounting standards
Sustainability-related financial disclosures cover the same reporting period as the financial statements and are reported at the same time. The core issue requiring finance-team cooperation is judging which P/L and B/S line items are connected to the financial effects of climate risk.
Latest 2026 Developments - The Standards Are Still Moving
SSBJ standards continue to be amended and supplemented after publication; treating the "2025 version" as static will lead to practical mistakes. The latest major developments are as follows.
- Practical Solution No. 1 (June 11, 2026): A new practical solution was issued for using GHG emissions under the 温対法 SHK system in climate-standard disclosures. It provides guidance on how to use SHK data already calculated in Japan for disclosure.
- Securities report preparation guide (April 10, 2026): The preparation guide for securities reports filed for the fiscal year ending March 2026 was published. It should be used as primary material for concrete drafting of the disclosure section.
- Continuing alignment with ISSB confirmed (March 31, 2026): SSBJ and ISSB confirmed continuing alignment between the two sets of standards, maintaining interoperability for global investors.
- Climate-related Disclosure Standard amendment (March 2026): The Climate-related Disclosure Standard (No. 2) has already been amended in March 2026. Companies need to refer to the latest version.
Practical Work to Build the Disclosure Organization
Document the basis for Scope 1 and 2 calculations
Document the measurement granularity for electricity consumption, sources of emissions factors, and aggregation boundaries. Because assurance starts with Scope1 and 2, the top priority is to manage this calculation basis with internal controls comparable to accounting data. Begin by building dashboards that aggregate monthly energy consumption by factory and site.
Estimate the financial effects of climate-related risks
Estimate the effects of carbon costs, physical risks, and transition risks on financial statements by scenario. Coordination with the CFO and finance team is essential. The most efficient approach is to start with materiality assessment and quantify the two or three items with the largest expected effect.
Establish a disclosure review process
Securities report disclosure carries false-statement risk. Design a process in which finance, legal, IR, and internal audit review drafts prepared by the ESG team, while also holding early discussions with registered assurance providers.
Practical Priorities - Where to Start
Because application is phased by market capitalization, the starting point is first to identify the company's application start year. Then proceed in the following order.
Phase 1 - Build the foundation:
- Confirm the application start year (FY2027/FY2028/FY2029) from the company's market-cap category
- Finalize and document Scope 1 and 2 calculation methods (directly tied to the first-year assurance scope)
- Check gaps between current securities-report sustainability disclosure and SSBJ requirements
Phase 2 - Estimate and dry-run:
- Quantitatively estimate the financial effects of climate-related risks, at least carbon cost
- Shift Scope 2 to market-based calculation and prepare renewable-energy certificate data
- Start discussions with assurance providers (initial scope: Scope1 and 2 plus governance and risk management)
Phase 3 - Live disclosure and assurance:
- Incorporate disclosures into the securities report and respond to assurance from the year after application starts
- Gradually expand Scope 3 disclosure while considering transitional measures and investor requests
SSBJ readiness is not only an ESG-team project; it spans finance, legal, IR, and procurement. Supplier-side preparation is covered separately in Supplier Preparation for the SSBJ Mandate, details of the assurance system in Assurance under FSA and ISSA5000, and Scope 3 primary-data collection in Collecting Primary Data from Suppliers.