1-20. Japan's Version of Sustainability Disclosure Standards (ISSB-Aligned) and What EHS Managers Should Know

Based on IFRS S1 (Disclosure of Sustainability-Related Financial Information) and IFRS S2 (Climate-Related Disclosure) issued by the International Sustainability Standards Board (ISSB) in 2023, Japan is also working to develop unified standards for sustainability disclosure. The Sustainability Disclosure Standards Board (SSBJ), led by the Financial Services Agency and the Accounting Standards Board of Japan (ASBJ), is taking the lead in developing Japanese versions of sustainability disclosure standards (known as J-ISSB standards), which are scheduled to be applied in stages to listed companies. This is expected to require companies to disclose reliable sustainability information to investors in the same way as financial statements.

The key point of these disclosure standards is to clearly present "sustainability information that is financially material to investors." While traditional CSR reports and integrated reports have been conscious of a wide range of stakeholders, the J-ISSB standards emphasize comparability and reliability from an investor perspective. In particular, disclosure of climate change-related risks has become mandatory, and specific data such as greenhouse gas emissions (Scope 1, 2, and 3), climate scenario analysis, and transition plans are required.

What's important for EHS (environmental and occupational health and safety) managers is that environmental data and health and safety information, which have previously been handled within their departments, will now be treated as "part of financial disclosure." In the environmental field, data such as energy consumption, water usage, waste emissions, and chemical substance management data will be disclosed to investors in numerical form, placing even greater demands on accuracy and accountability in the compilation of data. In addition, in the area of occupational health and safety, non-financial information such as the incidence rate of work-related accidents, lost work days, and employee engagement is expected to be disclosed, and connections with human capital management will also be emphasized.

The first practical challenge is "centralized data management." EHS data, which was previously managed by plant or department, must now be integrated company-wide in collaboration with the finance department and organized in an auditable format. The second is "identifying materiality." The ISSB standards require companies to identify sustainability issues that have a financial impact on their business and disclose information based on that information. This means that EHS risks and opportunities must be redefined from the perspective of business strategy. The third is "responding to external assurance." It is highly likely that audits and assurances will also be introduced to non-financial information in the future, making it essential to ensure the reliability and traceability of figures.

However, complying with these standards also presents an opportunity for companies. Appropriate EHS data disclosure goes beyond simply complying with regulations; it also demonstrates a company's risk management capabilities and sustainable growth potential to investors. For example, disclosing specific figures for improvements in water use efficiency and measures to prevent workplace accidents could be seen as an effort to increase corporate value rather than simply complying with compliance.

In conclusion, the Japanese Sustainability Disclosure Standards (ISSB compliant) elevate the duties of EHS personnel to the "business strategy area directly linked to financial disclosure." EHS personnel are expected to ensure data accuracy, clarify risks and opportunities, and be aware of connections with business strategies, in order to realize highly transparent disclosure that resonates with investors.