Japan introduces first ISSB-aligned sustainability disclosures standards

Japan has issued its first sustainability disclosure standards, which are expected to soon become mandatory for companies listed on the Tokyo Stock Exchange.

The Sustainability Standards Board of Japan (SSBJ) released the standards this week, noting that they are aligned with the International Sustainability Standard Board’s (ISSB) IFRS standards.

They include a universal sustainability disclosure standard, as well as general disclosures and climate-related disclosures (respectively aligned with IFRS S1 and S2).

The SSBJ added that these standards aimed to ensure international comparability, and were developed following “extensive discussions” with stakeholders.

“Great to see Japan taking an important step in advancing corporate sustainability reporting,” commented climate policy expert and former Head of Risk at the UN Principles for Responsible Investment (PRI) David Carlin.

“These standards are expected to apply to companies listed on the Tokyo Stock Exchange’s Prime Market, reinforcing Japan’s commitment to transparent ESG reporting and international alignment,” he added, noting that regulatory adoption and additional guidance for companies are expected soon.

Worldwide ISSB application continues to grow

More than 20 countries have adopted the ISSB’s sustainability disclosure standards since they were issued in June 2023, and this number continues to grow.

Jurisdictions that have made ISSB-aligned disclosures mandatory for listed companies include Brazil, Australia, China and the EU. Together, they represent nearly 55% of global GDP and more than 40% of global market capitalisation – not including Japan.

This is great news for investors, who have been calling for the global adoption of ISSB standards in order to harmonise sustainability reporting around the world and help them make more sustainable capital allocation decisions.

Over 40% of the world’s 4,000 largest listed firms still did not disclose their Scope 1 and 2 emissions in 2022. 

ISSB guidance for companies

While their mandatory application is spreading, the ISSB is also promoting the voluntary adoption of its IFRS S1 and S2 standards. In September 2024, the organisation released a guide for companies that are not mandated to report on their climate impacts in a way that is aligned with ISSB standards, but that wish to do so to meet investor expectations.

“The voluntary application guide helps companies navigate from their current reporting practices to applying ISSB Standards, providing a cost-effective route for companies to provide decision-useful, assurable financial information to investors," said ISSB Chair Emmanuel Faber.