ESG Quick Guide: Japan: Sustainability disclosure standards

On 5 March 2025, the SSBJ issued its inaugural sustainability disclosure standards (the “SSBJ Standards”) which incorporate key elements of the sustainability disclosure standards published by the International Sustainability Standards Board (“ISSB”) – IFRS S1 and IFRS S2 (the “ISSB Standards”).

The SSBJ Standards comprise three key documents: 

• the Application Standard, which tracks the fundamental matters under IFRS S1, outlining basic requirements for sustainability reporting;
• the General Standard, which is aligned with the core content under IFRS S1, focusing on sustainability-related risks and opportunities; and
• the Climate Standard, which mirrors IFRS S2, detailing climate-related disclosures.

Since March 2023, the Financial Services Agency (“FSA”) has mandated sustainability-related disclosure in the statutory annual securities report by all listed companies in Japan by following the four pillars recommended by the Task Force for Climate-related Financial Disclosures (“TCFD”). As the ISSB assumed responsibility for the TCFD in 2023, the issuance of the SSBJ Standards is aimed to ensure the international comparability in sustainability-related financial disclosures. 

Following a public consultation in late 2025 and amendments to the Cabinet Office Ordinance on Disclosure of Corporate Affairs by the FSA in February 2026, in April 2026 the FSA published a definitive report (the Definitive Report) and roadmap establishing a framework for mandatory sustainability reporting for large-cap issuers on the Tokyo Stock Exchange ("TSE") Prime Market and significantly expand human capital disclosure obligations.

Mandatory – but on a staggered basis depending on the market capitalisation of the listed company (see below)

All companies listed on the Prime Market of the TSE with a historical average market capitalisation of JPY 500 billion or more, provided that foreign issuers may use sustainability standards that the FSA deems equivalent, including the ISSB.

According to the Definitive Report, as of the end of the preceding five fiscal years (or less, if listed within such period),

• companies with average market capitalisation of JPY 3 trillion or more will be subject to mandatory disclosure requirements from the fiscal year ending March 2027, and mandatory third-party assurance on such disclosure from the fiscal year ending March 2028; and
• companies with average market capitalisation between JPY 1 trillion and JPY 3 trillion will be subject to mandatory disclosure requirements from the fiscal year ending March 2028, and mandatory third-party assurance on such disclosure from the fiscal year ending March 2029; and 
• companies with average market capitalisation between JPY500 billion and JPY1 trillion will be subject to mandatory disclosure from the fiscal year ending March 2029, and mandatory third-party assurance on such disclosure from the fiscal year ending March 2030.

The SSBJ Standards adopted by the FSA track the four pillars under TCFD’s Recommendations and require companies to disclose the following information on governance; strategy; risk management; and metrics and targets (see Quick Guide on TCFD). 

Companies are required to integrate this information into their financial reports and link it to the improvement of long-term corporate value. 

A "safe harbour" provision to disclosure guideline will also be introduced to protect companies from liability for inaccuracies in Scope 3 greenhouse gas (“GHG”) emissions data, provided that companies explain the assumptions and methodologies used in a reasonable and detailed manner.

The third-party assurance required for each category of listed companies is limited to Scope 1 and Scope 2 GHG emissions alongside information on governance and risk management processes in the first two years of the mandate. 

The SSBJ Standards adopt the concept of single materiality and require disclosure of information related to a company's financial performance. This allows companies to prioritise their reporting efforts by identifying sustainability issues that have a significant financial impact. 

However, information on social impacts is also recommended to be disclosed if it has a financial impact.

Companies will be permitted to use a "two-stage disclosure" process for the first two years of their respective mandates. This allows them to file their annual report on schedule (three months after each fiscal year end) and submit the detailed sustainability disclosures via an amendment report at a later date, no later than the deadline for their subsequent semi-annual report. 

Assurance framework
Under a "profession-agnostic" approach to assurance, audit firms and other specialised service providers will be eligible for registration to provide sustainability assurance, provided that they (i) are registered legal entities with an adequate financial base to ensure capacity for compensation, and (ii) establish a quality control system and ensure that lead assurance partners possess the necessary professional knowledge and experience. 

The assurance level will be set at “limited assurance” for the first two years of mandatory assurance, where the scope will be limited to disclosures on governance, risk management, and Scope 1 and 2 greenhouse gas emissions. Assurance providers will be required to adhere to Japanese assurance standards that will be developed.

The framework also introduced a comprehensive set of rules and oversight mechanisms to ensure effective inspection and supervision of assurance providers by the FSA, with key focuses on independence, partner rotation, confidentiality and duty to report.

Administrative measures, monetary penalties and civil liabilities have been introduced to ensure compliance by assurance providers, while companies and assurance providers can rely on a safe harbour rule against liability related to certain forward-looking information, provided specific disclosure requirements are met.

Following the implementation of the Definitive Report, the Japanese regulators continue to deliberate on various topics by taking into account the international trends, including:

• the applicability of mandatory disclosure and third-party assurance requirements to listed companies with market capitalisation of less than JPY500 billion; and
• the expansion of the third-party assurance scope for the third year and beyond.

• Press release: SSBJ issues Inaugural Sustainability Disclosure Standards to be applied in Japan
• About SSBJ Standards
• Interim report on sustainability disclosure and assurance by the FSA working group (Japanese only)
• Amendments to the Cabinet Office Ordinance on Disclosure of Corporate Affairs
• SSBJ website

• Blog post - Japan consults on adopting its sustainability disclosure standards modelled after the ISSB standards
• Blog post - Japan issues its sustainability disclosure standards which incorporates key elements of the ISSB standards
• Quick Guide on ISSB standards
• Quick Guide on TCFD