Publication and Background of the SSBJ Standards

In March 2025, the Sustainability Standards Board of Japan (SSBJ) published what may constitute  a turning point in Japan’s sustainability disclosure regime, namely the “SSBJ Standards”. ¹ These standards require companies to disclose, in a comprehensive manner, not only financial information but also sustainability-related information, including climate change and other sustainability factors. Furthermore, in September of the same year, a handbook providing explanatory guidance for the practical application of the standards was also published. ² It should be noted that this handbook was published without deliberation by the SSBJ and does not constitute part of the SSBJ Standards.

¹ Sustainability Standards Board of Japan (SSBJ), Sustainability Standards Board of Japan Publishes Sustainability Disclosure Standards, News Release, March 5, 2025 (in Japanese), 

2 Sustainability Standards Board of Japan (SSBJ), Publication of the SSBJ Handbook, September 2025 (in Japanese), 

Against this backdrop, the growing impact of climate change, the increasing frequency of natural disasters, and the rapid expansion of ESG investment have significantly increased the importance of corporate disclosure of non-financial information. In particular, in global capital markets, it has become increasingly evident that investors and financial institutions evaluate not only financial statements but also climate-related risks and decarbonization policies, and Japanese companies are likewise increasingly required to disclose sustainability information aligned with international standards. Internationally, the International Sustainability Standards Board (ISSB), established under the IFRS Foundation, published IFRS S1 and S2 in 2023, thereby promoting the international standardization of sustainability disclosure. In the European Union, the Corporate Sustainability Reporting Directive (CSRD) has come into force, and in the United States as well, the Securities and Exchange Commission (SEC) has adopted climate-related disclosure rules, indicating that the institutionalization of sustainability disclosure is advancing in major markets. In light of these international developments, the SSBJ Standards have been designed as a three-tier structure (Application Standards, General Standards, and Climate Standards), taking into account the structure and content of IFRS S1 and S2 while also giving consideration to the disclosure practices of Japanese companies.

Understanding Scope 3 Emissions Disclosure

 The most significant distinguishing feature of the SSBJ Standards lies in the requirement for companies to disclose not only qualitative descriptions of sustainability-related risks and opportunities, but also quantitative information, such as greenhouse gas (GHG) emissions. Of particular significance is the requirement that companies disclose not only Scope 1 (direct emissions from their own operations) and Scope 2 (indirect emissions from purchased electricity and similar sources), but also, as a general rule, Scope 3 emissions across their entire value chain.

 The most substantial impact on corporate practice arises from the mandatory disclosure of GHG emissions classified as “Scope 3.” Scope 3 refers to emissions associated with the entire value chain, extending beyond direct emissions arising from a company’s own business activities (Scope 1) and indirect emissions from consumed electricity (Scope 2), and encompassing upstream and downstream activities such as those of business partners, logistics, product use after sale, and waste disposal. In many industries, Scope 3 emissions are estimated to account for between 70 and 90 percent of total GHG emissions, highlighting the potentially far-reaching impact of these disclosure requirements on companies.

 Source: Ministry of the Environment, “Overview of Supply Chain Emissions” (released 1 March 2023)

 Scope 3 is classified into 15 categories, including, for example, “Purchased Goods and Services” (Category 1), “Transportation and Distribution” (Categories 4 and 9), and “Use of Sold Products” (Category 11). These comprise emissions based on the activities of external business partners and customers outside the company; therefore, in preparing disclosures, the collection of information from external parties is indispensable.

 Source: Ministry of the Environment, “Concept of Calculating Supply Chain Emissions” p. 10.

 In this respect, this Scope 3 disclosure requirement constitutes a distinctive feature that clearly departs from conventional corporate disclosure requirements concerning sustainability. That is to say, Scope 3 disclosure is not something that can be completed solely on the basis of a company’s own internal information; rather, it is a disclosure obligation that entails a series of processes involving engagement with business partners to obtain relevant information and data, and further to verify their accuracy and consistency.

 Under such institutional requirements, companies are required to undertake the following practical responses. ³

・Identification of emission sources within the value chain and determination of the scope
・Establishment of systems for internal and external collaboration toward the calculation and visualization of emissions
・Determination of policies and content for engagement with business partners・Development of a verification framework to ensure the reliability of disclosed information

 In other words, what is required is not merely the preparation of a report, but the construction of an integrated governance system that entails a fundamental review of corporate supply chain management and procurement strategy itself.

 ³ Ministry of the Environment of Japan, Practical Guide to Supplier Engagement for Decarbonization Across the Entire Value Chain (FY2024 Edition) (in Japanese).

Publication of the Financial Services Agency’s Interim Summary of Issues and Roadmap

 The institutional positioning of such Scope 3 disclosure was further clarified by the “Interim Summary of Issues” and the “Roadmap toward the Application of Sustainability Disclosure Standards and the Introduction of an Assurance System,” both published on 17 July 2025 by the Financial System Council (Working Group on the Disclosure and Assurance of Sustainability Information). ⁴ ⁵　These documents indicate that, from around 2027 onward, the obligation to disclose information based on the SSBJ Standards may be incorporated into securities reports under the Financial Instruments and Exchange Act, and that, going forward, such disclosure will increasingly take on the character of “statutory disclosure,” for which mere formal compliance will no longer suffice.

 According to the Interim Summary of Issues, the timing for the commencement of application of the SSBJ Standards and the introduction of the third-party assurance system is, as a basic matter, to be set out as follows:

• With respect to the timing of the introduction of third-party assurance, since the EU’s CSRD will require, from the 2028 financial year (or from the fiscal year ending March 2029 for companies with a March fiscal year-end), the disclosure of sustainability information on a consolidated basis with third-party assurance under the CSRD for certain large-scale companies outside the EU, it is considered desirable in Japan to introduce the assurance system prior to the 2028 financial year, and the following timing for implementation is being considered.

• On the other hand, with respect to the timing of application of the SSBJ Standards, since listed large companies located in the EU have already been disclosing information from the 2024 financial year under the CSRD, discussions have been taking place that Japanese companies competing with large EU companies should likewise proceed with prompt disclosure of information, and it is being considered that the SSBJ Standards should be introduced one year earlier than third-party assurance.

	Category	SSBJ Application Date	Introduction of Third-Party Assurance System
I	Companies with a market capitalization of JPY 3 trillion or more	Fiscal year ending March 2027	Fiscal year ending March 2028
II	Companies with a market capitalization of less than JPY 3 trillion but JPY 1 trillion or more	Fiscal year ending March 2028	Fiscal year ending March 2029
III	Companies with a market capitalization of less than JPY 1 trillion but JPY 500 billion or more	Fiscal year ending March 2029	Fiscal year ending March 2030

 However, with respect to the timing of the commencement of application under category III in the chart above, the Interim Summary states that the matter will continue to be examined while closely monitoring domestic and international developments, and that a conclusion will be reached within the current year by the Working Group.

 Source: Financial Services Agency, “Roadmap toward the Application of Sustainability Disclosure Standards and the Introduction of an Assurance System”

 ⁴ Financial System Council (Working Group on the Disclosure and Assurance of Sustainability Information), Interim Summary of Issues (in Japanese).

 ⁵ Financial System Council, Roadmap toward the Application of Sustainability Disclosure Standards and the Introduction of an Assurance System (in Japanese).

Another important issue is the establishment of a “safe harbor provision” regarding Scope 3 disclosure. This provision is important because there is a concern that, where a company makes disclosures based on information obtained from third parties such as business partners, if such information is subsequently found to be inaccurate, the company may be held liable for misstatements or similar inaccuracies.

In response, the Working Group is considering the introduction of a “safe harbor” system under which, even if it is subsequently found that information regarding GHG emissions in Scope 3 disclosure was erroneous, liability for misstatements would not be imposed provided that the following conditions are satisfied:

① The company can demonstrate that it has appropriately assessed the suitability of relying on information obtained from third parties outside its control.
② The company can demonstrate that it has given appropriate internal consideration to the reasonableness of the estimates.
③ The company can demonstrate that the disclosed information falls within a range generally regarded as reasonable.

 This institutional design is of significant importance from the perspective of preventing defensive disclosure by companies in Scope 3 reporting and encouraging sincere efforts. At present, the arrangement is primarily at the level of guidelines; however, it is anticipated that discussions will proceed with a view toward future legislation.

Impact on Companies (Making the Supply Chain Work as a New Source of Competitive Advantage)

In responding to Scope 3 requirements, requesting business partners to provide GHG emissions data and to cooperate in emissions reduction may necessitate a substantial redefinition of the relationship between companies and their business partners, as compared with conventional procurement and quality control practices. Moreover, where a large company has numerous small and medium-sized enterprises as its business partners, it is of critical importance that such requests do not remain mere requests but rather include the design of support measures and incentive schemes.

For example, the following measures have already been introduced by leading companies.

・Utilization of support measures for investment in CO₂ reduction equipment for small and medium-sized enterprises.⁶
・Provision of GHG emissions calculation tools and training programs for suppliers
・Granting incentives, such as supplier awards for companies demonstrating outstanding decarbonization initiatives and long-term contracts

Companies' ability to respond effectively to these requirements is likely to have a direct impact on ESG ratings, investor confidence, and ultimately their competitiveness in the marketplace.

In the next installment of this series (Part II), the legal risks that may arise during companies' efforts to respond to Scope 3 disclosure will be examined from the perspectives of the Antimonopoly Act, the Subcontract Act, and the Unfair Competition Prevention Act (trade secrets), and appropriate approaches to corporate risk management will be considered.

6 Ministry of Economy, Trade and Industry (METI) and Ministry of the Environment of Japan (MOE), Carbon Neutrality Support Measures for Small and Medium-sized Enterprises, May 2025 (in Japanese)