ISSB Adoption in Japan: SSBJ Standards Explained

Japan is among more than 30 jurisdictions around the world that have adopted or are in the process of adopting the International Sustainability Standards Board (ISSB) framework for climate disclosure. In March 2025, following extensive public consultation, the Sustainability Standards Board of Japan (SSBJ) issued its inaugural disclosure standards, which incorporate IFRS S1 and IFRS S2. Japan’s Financial Services Agency (FSA) has not yet determined who will be required to comply with the SSBJ standards, or when. However, a proposed timeline is under consideration.

In this article, we’ll provide an overview of Japan’s sustainability disclosure standards, including potential scope and timeline for reporting—along with what companies should do now to prepare and what’s still being finalized (including assurance).

Background: What are the ISSB Standards? 

Two standards, IFRS S1 and IFRS S2, were designed to create a global baseline for climate disclosure.

Since the ISSB finalized its two climate disclosure standards—General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and Climate-related Disclosures (IFRS S2) in 2023, more than 30 jurisdictions around the world have fully or partially incorporated them. 

The standards are built on the framework created by the Task Force on Climate-Related Financial Disclosures (TCFD), which has shaped climate reporting practices and regulations over the past decade. IFRS S1 and S2 draw on other well-known standards, including those from the Climate Disclosure Standards Board (CDSB) and the Sustainability Accounting Standards Board (SASB). They also provide options for companies to integrate disclosures based on the European Sustainability Reporting Standards (ESRS) and the Global Reporting Initiative (GRI), as long as those disclosures are designed to meet investor needs.

The ISSB is an independent standard setter—it does not impose requirements on any jurisdiction or company. Its standards are designed to serve the markets and to provide a structure for consistent and comparable regulations across borders. 

Why Japan is Aligning with ISSB

Japan’s move toward ISSB-aligned reporting is happening in the broader context of global capital markets and increasing investor demand for consistent, decision-useful sustainability information.

Several forces are converging:

• Investor comparability and global capital access. Japanese listed companies compete for global investment, and global investors increasingly expect climate and sustainability information to be comparable across markets. ISSB is designed to provide that “global baseline.”
• Maturing sustainability reporting expectations. Japan already requires sustainability disclosures in annual securities reports for listed companies, and the shift to ISSB-aligned standards builds on this direction while strengthening comparability, governance, and financial connectivity.
  
• National transition strategy. Japan’s net-zero commitments and broader decarbonization efforts increase the need for consistent reporting of climate-related risks, opportunities, and progress against targets.
• Aiming for minimal divergence from the global baseline. The SSBJ’s approach signals an intent to align closely with IFRS S1 and IFRS S2, reducing complexity for companies that operate internationally or report across multiple jurisdictions.

What Do Japan’s SSBJ Standards Require? 

The new ISSB-aligned standards follow existing TCFD reporting. 

For Japanese companies, sustainability reporting is not a new concept. A March 2023 rule by the Financial Services Agency (FSA) requires all listed companies in Japan to provide sustainability disclosures in annual securities reports, based on the four pillars of the Task Force on Climate-related Disclosures (TCFD), including metrics for Scope 1, 2, and 3 emissions. Prior to that, the Tokyo Stock Exchange mandated TCFD disclosure on a “comply or explain” basis. The TCFD sunsetted in 2024, transitioning to ISSB. 

In 2022, the country formed the Sustainability Standards Board of Japan (SSBJ), which was charged with developing national disclosure standards and contributing to the development of the ISSB’s global standards. 

The SSBJ issued its inaugural ISSB-based sustainability disclosure standards in March 2025, a significant step in aligning with global norms. The SSBJ standards incorporate IFRS S1 and IFRS S2, calling on companies to report on all sustainability-related financial risks and opportunities, including Scope 1, 2, and 3 emissions. 

What “IFRS S1 + S2 incorporated” means in practice

Because the SSBJ standards incorporate IFRS S1 and IFRS S2, companies should expect requirements that broadly align with the ISSB structure and core content:

IFRS S1 (General Requirements) focuses on:

• Governance over sustainability-related risks and opportunities
• Strategy and how sustainability issues affect business model, strategy, and decision-making
• Risk management processes for identifying, assessing, and managing sustainability-related risks
• Metrics and targets used to monitor and manage sustainability-related risks and opportunities
• Stronger emphasis on financial materiality and connectivity to financial statements and enterprise planning

IFRS S2 (Climate-related Disclosures) focuses on:

• Climate-specific governance, strategy, risk management, and metrics/targets
• Climate-related risks and opportunities (transition and physical)
• Emissions (Scope 1, 2, and 3)
• Targets, transition plans, and performance against those goals
• Scenario analysis and climate resilience (where applicable)

This alignment matters because it means companies can prepare using the global ISSB baseline while Japan finalizes scope and timing.

In its exposure draft, the SSBJ explained: “In developing high-quality and internationally consistent sustainability disclosure standards, the SSBJ decided to align SSBJ Standards with the ISSB’s IFRS Sustainability Disclosure Standards. Accordingly, the SSBJ decided to incorporate all the requirements of ISSB Standards into SSBJ Standards and to add, when considered necessary, any jurisdiction-specific alternatives that entities can choose to apply.”

However, Japan’s FSA is still in the process of determining who will be required to comply with the new SSBJ standards, and when. 

Who will be required to comply with the SSBJ standards? 

Reporting is currently voluntary, but expected to become mandatory. 

At this point, application of the SSBJ standards is still voluntary. However, the SSBJ developed the standards with the assumption that they would eventually become mandatory. In 2024, the FSA’s Working Group on Disclosure and Assurance of Sustainability-related Financial Information discussed a potential SSBJ timeline, which would phase in reporting for Prime Market-listed companies based on size. While the timeline is not final, it provides some indication of possible reporting deadlines.

Likely direct vs. indirect impact

Even before requirements become mandatory, the SSBJ standards can impact companies in two ways:

Likely directly impacted (once mandatory):

• Prime Market-listed companies, potentially phased in based on market cap (as proposed)
• Other listed companies, potentially in later phases

Indirectly impacted (even if not legally required at first):

• Private companies in the supply chain of listed companies (Scope 3 requests, procurement requirements)
• Subsidiaries and affiliates of listed groups
• Suppliers and service providers supporting emissions data, assurance readiness, and climate risk analysis
• Companies seeking capital from lenders/investors that align their expectations with ISSB

This is especially relevant for Scope 3 emissions, where listed companies often require data from suppliers to improve coverage and quality.

Possible SSBJ Reporting Timeline for Listed Companies

Japan’s SSBJ Issues New Exposure Drafts Aligned to ISSB S2 Amendments (Dec 2025)

In December 2025, Japan's SSBJ released three new exposure drafts proposing targeted amendments to its sustainability disclosure standards. These drafts are intended to maintain functional alignment with the ISSB amended IFRS S2 Climate-related Disclosures, while addressing implementation considerations raised since the initial SSBJ standards were issued earlier in 2025.

The exposure drafts cover proposed updates to:

• the Universal Sustainability Disclosure Standard,
• general sustainability disclosure requirements, and
• climate-related disclosures, including technical clarifications related to greenhouse gas (GHG) emissions reporting.

Notably, the proposed amendments reflect the ISSB’s recent updates to IFRS S2, including refinements related to Scope 3 emissions disclosures, use of industry classification systems for financed emissions, permitted alternatives to the GHG Protocol in limited circumstances, and updated global warming potential values.

The public consultation period for these exposure drafts runs through January 28, 2026, with final amendments expected by March 2026. Once finalized, the SSBJ plans to publish an updated English “Schedule of Differences” to clearly outline any remaining jurisdiction-specific differences between the SSBJ standards and ISSB standards.

These developments underscore Japan’s commitment to keeping its sustainability disclosure framework closely aligned with global standards, while providing clarity and flexibility to support high-quality, decision-useful reporting.

What’s Still Being Finalized (and Why It Matters)

1) Assurance expectations

Sustainability disclosure regimes globally are moving toward independent assurance, often phased in (for example, starting with limited assurance and moving toward reasonable assurance). Japan’s Working Group explicitly covers both disclosure and assurance, signaling that assurance requirements may be a core part of the final framework.

Even before rules are finalized, companies should anticipate that:

• Auditability and traceability of emissions and climate data will matter more
• Documentation and internal controls will become increasingly important
• Cross-functional ownership (sustainability + finance + procurement + operations) will be necessary

2) Transitional reliefs and practical flexibility

ISSB adoption often involves transitional provisions (for example, first-year flexibility on certain disclosure elements). While Japan’s final approach is still evolving, companies should watch for guidance on:

• Potential phase-ins for Scope 3 coverage and data quality expectations
• Requirements for comparative periods in early reporting years
• Acceptable use of estimates, proxies, and data hierarchies (especially for Scope 3 categories)

These details can significantly affect implementation sequencing and resourcing.

3) Implementation guidance and enforcement approach

Many jurisdictions publish additional guidance (or regulator FAQs) that clarify interpretation, scope, and expectations for “decision-useful” disclosures. Companies should monitor how Japan’s regulator frames:

• Materiality thresholds and what is “reasonably expected” to affect enterprise value
• Expectations for scenario analysis depth
• Enforcement posture and how disclosures will be reviewed

How Should Companies Prepare for SSBJ Reporting?

Although final requirements and timelines are still under review, companies can take concrete steps now to prepare for compliance with Japan’s SSBJ standards, particularly given their close alignment with IFRS S1 and IFRS S2. Early preparation will reduce implementation risk and support higher-quality, decision-useful disclosures.

1. Map Existing Disclosures to IFRS S1 and IFRS S2

Start by conducting a structured gap assessment against IFRS S1 and IFRS S2. This should include:

• Identifying where sustainability-related risks and opportunities are already disclosed (e.g., annual reports, integrated reports, TCFD disclosures)
• Mapping those disclosures to specific IFRS S1 and S2 requirements across governance, strategy, risk management, metrics, and targets
• Documenting gaps, inconsistencies, or areas that rely on qualitative narrative rather than measurable data

This exercise helps clarify the scope of work required and prioritizes remediation efforts ahead of mandatory reporting.

2. Build a Robust Emissions Data Foundation

While many Japanese listed companies already report Scope 1, 2, and 3 emissions, ISSB-aligned reporting requires a stronger focus on data accuracy, transparency, and traceability. Companies should:

• Review emissions calculation methodologies and emission factor sources for consistency and documentation
• Improve Scope 3 data collection by engaging priority suppliers and using more representative data where available
• Establish clear data ownership across sustainability, procurement, finance, and operations teams

A reliable emissions data foundation is critical not only for disclosure but also for risk assessment, target-setting, and future assurance engagements.

3. Integrate Climate Risks Into Financial and Enterprise Risk Processes

IFRS S1 and S2 emphasize the financial relevance of sustainability information. To prepare, companies should:

• Identify climate-related risks and opportunities that could reasonably affect financial performance, position, or future prospects
• Align climate risk assessments with existing enterprise risk management (ERM) and financial planning processes
• Begin linking emissions, transition risks, and physical risks to financial impacts where feasible

This integration supports disclosures that meet investor expectations and regulatory intent.

4. Establish Governance, Controls, and Documentation

As sustainability reporting moves toward the same level of scrutiny as financial reporting, companies should begin formalizing internal controls. Key steps include:

• Defining roles and responsibilities for data collection, review, and approval
• Documenting assumptions, methodologies, and estimates used in climate and emissions reporting
• Preparing for future third-party assurance by ensuring data is auditable and reproducible

Taking these steps early reduces the burden of future compliance and supports consistent reporting over time.

5. Develop a Phased Implementation Roadmap

Given the likelihood of phased adoption based on company size, organizations should create a multi-year roadmap that aligns with anticipated reporting deadlines. This roadmap should:

• Prioritize high-impact disclosure areas first (e.g., emissions, governance, material climate risks)
• Sequence improvements to data systems and processes over multiple reporting cycles
• Account for evolving regulatory guidance and assurance expectations

A phased approach allows teams to move from baseline compliance toward more mature, integrated sustainability reporting.

Preparing for ISSB-Aligned Climate Disclosure in Japan

While Japan is still ironing out the details of mandatory application of its SSBJ standards, listed companies can expect to report in close alignment with IFRS S1 and S2 as soon as 2027. Establishing a reliable system now for collecting and calculating emissions data will streamline the transition to SSBJ reporting and prepare businesses for compliance with other disclosure standards around the world. 

Find out how Persefoni can help you prepare for climate disclosure in Japan. 

Japan ISSB / SSBJ FAQs

Below are common questions we hear as companies prepare for ISSB-aligned disclosure in Japan.

Is ISSB reporting mandatory in Japan today?

Not yet. Application of the SSBJ standards is currently voluntary, and Japan’s FSA is still determining who will be required to comply and when. However, the standards were developed with the expectation of eventual mandatory use.

How different are SSBJ standards from IFRS S1 and IFRS S2?

SSBJ standards incorporate IFRS S1 and IFRS S2, and the SSBJ has indicated an intent to remain internationally consistent while allowing jurisdiction-specific alternatives when considered necessary. For many organizations, preparing against IFRS S1 and S2 is a strong practical starting point.

Which companies are most likely to be first in scope?

Proposed timelines indicate the earliest mandatory reporting could begin with large Prime Market-listed companies (by market cap thresholds), potentially starting with annual periods ending March 2027. Final scoping is still under review.

Will Scope 3 emissions be required?

IFRS S2 includes Scope 1, 2, and 3 emissions disclosures. Many Japanese listed companies already disclose Scope 3 under existing expectations; however, how Japan addresses transitional reliefs (such as phase-ins, acceptable estimates, or comparative requirements) will be important to watch.

Will third-party assurance be required?

Japan is actively discussing assurance through the FSA’s Working Group on Disclosure and Assurance of Sustainability-related Financial Information. While final rules are not set, companies should prepare as though assurance will be introduced, potentially in phases, and build audit-ready processes now.

Does this replace TCFD reporting?

TCFD shaped the structure of climate reporting for years and is closely aligned with how IFRS S2 is organized (governance, strategy, risk management, metrics/targets). The TCFD framework sunsetted in 2024, and many jurisdictions are shifting toward ISSB-aligned reporting to maintain comparability.

How does Japan’s approach relate to CSRD/ESRS or other regimes?

ISSB is designed as a global baseline focused on investor decision-useful information (enterprise value). ESRS (CSRD) is broader in scope and includes double materiality concepts. Many companies operating across jurisdictions will need a strategy to map, reconcile, and streamline disclosures across regimes.