Japan Takes Step Towards IFRS-Aligned Sustainability Reporting

Based on the guidelines created by the International Sustainability Standards Board (ISSB) of the IFRS Foundation, the Sustainability Standards Board of Japan (SSBJ) announced the release of its finalised sustainability disclosure standards.

These standards are expected to serve as the foundation for required reporting of sustainability and climate-related data by listed Japanese companies.

Following a 2023 directive by the Financial Services Agency (FSA) regulator to include a sustainability-related information section in the annual filings of all listed companies, with mandatory disclosures covering governance, risk management, strategy, and indicators and targets, the release represents a significant step towards internationally-aligned sustainability reporting requirements for Japanese companies.

The Tokyo Stock Exchange revised its corporate governance code in 2021, requiring prime market-listed companies to report on sustainability initiatives on a "comply-or-explain" basis and to start making climate-related disclosures based on the TCFD recommendations. This is just one example of how Japanese regulators and exchanges have been raising the bar for sustainability disclosures for businesses in recent years.

After the launch of the ISSB, the SSBJ was established in 2022 under the auspices of Japan's Financial Accounting Standards Foundation (FASF) to contribute to international sustainability reporting standards and develop sustainability reporting standards in accordance with a legal framework to be developed by the FSA. The SSBJ made the decision to harmonise its new standards with the ISSB standards in order to attain international comparability.

The IFRS Foundation International Sustainability Standards Board (ISSB) was introduced in November 2021 with the aim of developing disclosures of IFRS sustainability standards to obtain information on sustainability risks and opportunities. In June 2023, IFRS published its first general sustainability (IFRS S1) and climate (IFRS S2) emergency.

In March 2024, SSBJ released a new standard of exposure design. After the final standard was published, the board said there was a difference between the standard and the ISSB standard to reduce the initial design after feedback. SSBJ announced that it will soon be publishing a schedule of differences between its standards and ISSB standards, adding that it includes all requirements for the ISSB standards, which has been added to the responsible alternatives where necessary.

The SSBJ publication consists of three criteria in contrast to the two ISSBs, including the general sustainability discussion standard "Applying Appropriate Standards," the topic-based sustainability open stance standard "General Disclosure," and the subject-based sustainability discussion standard no. "Climate-related information.

Air-conditioned disclosures correspond to IFRS S2, but SSBJ corresponds to two criteria releases to meet IFRS S1.

SSJB said it should develop the criteria from the assumption that it should be used by companies listed on the major markets of the Tokyo Exchange.

(Source: ESGTODAY)