SSBJ (Sustainability Standards Board of Japan) finalized Japan's sustainability disclosure standards (SSBJ standards) in March 2024. While based on the IFRS S1 and S2 standards of the ISSB (International Sustainability Standards Board), they set application requirements that align with Japan's regulatory and accounting practices. The Financial Services Agency (FSA) has a policy of phasing in mandatory sustainability information disclosure in securities reports (yukashoken hokokusho), with approximately 1,700 Prime Market-listed companies as the target for early application.
The Positioning of SSBJ and ISSB — The Overall Picture of the Framework
The ISSB (International Sustainability Standards Board) is an international body established by the IFRS Foundation in 2021 to develop disclosure standards for sustainability information with material impact on corporate finances. The IFRS S1 (General Requirements) and S2 (Climate-related Disclosures) standards finalized by ISSB in 2023 have become, alongside Europe's CSRD, one of the two pillars of global disclosure standards.
SSBJ is the body that, under an agreement with the IFRS Foundation, translates and applies ISSB standards for Japan. SSBJ standards essentially maintain the content of IFRS S1 and S2 while aligning with Japan-specific accounting standards (Japanese GAAP) and providing transitional provisions for phased application.
To summarize the relationship between ISSB and SSBJ in a single sentence: ISSB standards are the global standard, and SSBJ is the Japanese-language, Japan-law-compliant version of those standards. Since investors look at alignment with ISSB, the effective required level of disclosure essentially conforms to IFRS S1 and S2.
Implementation Schedule and Target Companies
Approximately 1,700 Prime Market companies are expected to be subject to early mandatory application for fiscal years ending March 2027 (FY2027). Discussion is progressing toward phased application to Standard Market and Growth Market companies beginning around 2030. However, the FSA's final public notice and details of implementing regulations continue to require monitoring, and companies should verify their own applicable timeline based on amendments to securities report disclosure requirement notices.
The disclosure destination is the securities report (yukashoken hokokusho). Disclosure in securities reports under the Financial Instruments and Exchange Act carries legal force, and false statements could constitute a violation of the Financial Instruments and Exchange Act. This is the most significant difference from CSR reports and voluntary disclosure, and internal controls and external audits are required to ensure the accuracy of disclosed content.
Key Differences from ISSB Standards
Phased application of Scope 3 disclosure
IFRS S2 requires disclosure of Scope 3 (value chain emissions), but the SSBJ standards provide a relaxation measure that treats Scope 3 disclosure as optional for the time being. However, disclosure demands from investors and business partners are increasing even before mandatory requirements kick in, and in practice, companies with major suppliers face pressure for early compliance. Completely deferring Scope 3 may become a long-term risk.
Granularity of scenario analysis disclosure
Regarding the financial impact estimates under the 1.5°C and 4°C scenarios required by IFRS S2, the SSBJ standards are being discussed with a direction toward allowing certain simplified approaches out of consideration for smaller companies. The required level for large Prime Market companies is essentially equivalent to ISSB. Scenario analysis centers on the selection of reference scenarios (IEA NZE, IPCC SSP, etc.) and financial impact estimation.
Phased introduction of assurance
For third-party assurance of Scope 1 and 2 emissions, the SSBJ standards may provide a phased grace period for the transition to reasonable assurance. The expectation is to begin with limited assurance. Assurance costs are estimated at approximately JPY 1–3 million in the first year as fees to audit firms and environmental specialist firms.
Connection to accounting standards
IFRS S1 requires simultaneous disclosure with financial statements, and SSBJ is working through practical issues related to how to connect with Japanese GAAP. The core question requiring collaboration between the finance department — which P&L and balance sheet line items the financial impact estimates for climate risk are linked to — is the critical issue.
Practical Steps for Building a Disclosure Framework
Document the basis for Scope 1 and 2 calculations
Document the granularity of electricity consumption measurement, sources of emission factors, and the definition of the consolidation boundary. Recording the calculation basis now, in preparation for future third-party assurance, will substantially reduce subsequent audit effort. The ultimate goal is to build a framework for managing emissions data under internal controls equivalent to accounting data. Begin by building a dashboard that can confirm and aggregate energy consumption data from each factory and site on a monthly basis.
Estimate the financial impact of climate-related risks
Estimate the impact of carbon taxes, physical risks, and transition risks on financial statements by scenario. Collaboration with the CFO and finance department is essential, and there are limits to what the ESG department can handle alone. Start with 'identifying high-materiality risks (materiality assessment)' and focus quantitative estimation on 2–3 items judged to have large impacts — this is the most effort-efficient approach.
Establish a review process for disclosed content
Information included in securities reports carries the risk of false statement liability. Establishing a review process involving internal audit, external audit firms, and the legal department is directly linked to ensuring disclosure quality and reducing legal risk. The recommended framework is one where draft disclosures prepared by the ESG department are reviewed by four departments: finance, legal, IR, and internal audit.
Practical Priorities — Where to Begin
SSBJ compliance is broad in scope, and building everything at once is unrealistic. The following prioritization for getting started is recommended in preparation for mandatory application in FY2027.
Phase 1 (FY2025) — Foundation Building:
- Finalize and document the Scope 1 and 2 emissions calculation methodology
- Create a qualitative list of climate-related risks (entry point for materiality assessment)
- Confirm gaps between current sustainability disclosure content in securities reports and SSBJ requirements
Phase 2 (FY2026) — Estimation and Dry Run:
- Quantitatively estimate the financial impact of climate-related risks (at minimum, carbon costs)
- Transition Scope 2 to market-based calculation (build renewable energy certificate infrastructure)
- Begin discussions with external audit firms and assurance bodies
Phase 3 (FY2027) — Full Disclosure:
- Incorporate into securities reports and execute the assurance process
- Voluntary early Scope 3 disclosure (in response to investor requests)
SSBJ standards compliance is a cross-functional project spanning not just the ESG department but also finance, legal, IR, and procurement. Prime Market-listed companies should finalize the direction for framework building during FY2025, execute a dry run in FY2026, and prepare for full disclosure in FY2027. Early consultation with external sustainability consultants or the ESG advisory divisions of audit firms is an effective means of avoiding excessive internal effort.