4 August 2023
Mr. Emmanuel Faber, Chair
International Sustainability Standards Board
The IFRS Foundation
Columbus Building, 7 Westferry Circus
Canary Wharf, London, E14 4HD
United Kingdom

Comments on the Request for Information 2023 (ISSB/RFI/2023/1)
Consultation on Agenda Priorities
Introduction
1. The Sustainability Standards Board of Japan (‘the SSBJ’ or ‘we’) welcome theopportunity to provide our comments on the International Sustainability Standards
Board (ISSB)’s Request for Information 2023 (ISSB/RFI/2023/1) Consultation on
Agenda Priorities (‘the RFI’), published in May 2023.
2. Our fundamental thinking in developing sustainability-related financial disclosuresthat meet the needs of primary users is that standard setters must prescribe specificdisclosure requirements based on specific disclosure objectives that are derived fromthe overall disclosure objectives of the standard.
Such specific disclosure
objectives should clarify why users need and how users are likely to use the resulting
disclosures. This thinking forms the basis of our comments.
Supporting the implementation of IFRS S1 and IFRS S2
3. As we noted in our comment letters related to the Exposure Draft (ED/2022/S1) IFRSS1 General Requirements for Disclosure of Sustainability-related Financial
Information and the Exposure Draft (ED/2022/S2) IFRS S2 Climate-related
Disclosures 1 , IFRS Sustainability Disclosure Standards will not automaticallyIn this letter, the ISSB’s Exposure Draft ‘IFRS S1 General Requirements for Disclosure of
Sustainability-related Financial Information’ is referred to as ‘Draft S1’ and the finalised standard
is referred to as ‘IFRS S1.’ Similarly, the ISSB’s Exposure Draft ‘IFRS S2 Climate-related
Disclosures’ is referred to as ‘Draft S2,’ and the finalised standard is referred to as ‘IFRS S2.’
1

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become global standards. Rather, it is for each jurisdiction to decide whether toapply IFRS Sustainability Disclosure Standards, and the ISSB does not have theauthority to determine who should or could apply them. Accordingly, we believethat IFRS Sustainability Disclosure Standards must be accepted by jurisdictions
around the world to become truly global standards.
4. While we appreciate the accomplishments of the ISSB in completing IFRS S1 andIFRS S2 in such a short period of time, we are concerned that the standards may not
be well understand by constituents around the world given that the standards weredeveloped in such a short time period. In addition, we note that new issues may be
identified when entities consider their application, given that the two standards are
the first standards to be developed by the ISSB.
5. Accordingly, for the next two years, we are of the view that the ISSB should prioritisethe ‘foundational work’ in paragraph 16(a) of the RFI, in particular, supporting theimplementation of IFRS S1 and IFRS S2. Specifically, as described in ‘Table 1—
The ISSB’s activities’ of the RFI, the ISSB should establish and implement processes,
including work to develop and strengthen guidance and materials, to support theimplementation of the standards and address the issues identified.
New research and standard-setting projects (potential projects)
Priority of potential projects
6. We agree that the four potential projects identified in paragraph 38 of the RFI,
biodiversity, ecosystems and ecosystem services (BEES), human capital, humanrights and integration in reporting, are all important topics of high priority. In
particular, we suggest that human capital be given the highest priority, based on the
expectations of primary users regarding decision-useful information.
7. As described in paragraph 37 of this letter, we believe that the information related tohuman capital should be disclosed in sustainability-related financial disclosures.
This is because, although human capital is an essential capital of an entity and islikely to affect its enterprise value, there is currently little information about humancapital in its financial report that meets the needs of investors.
Research over the next two years
8. Sustainability-related financial disclosures are at an early stage of development.
We believe it is important for the ISSB to keep abreast of developments of other2 / 24

standard-setters and, where appropriate, to exchange ideas to ensure that thedisclosures in each jurisdiction are aligned as far as possible to achieve comparability
for primary users and interoperability for preparers.
9. We are concerned that, if the ISSB does not undertake any new research in areas
where other standard-setters are developing or have developed standards, newinconsistencies between standards developed by the ISSB and by the other standardsetters will arise, and it is likely that the ISSB would need to resolve theinconsistencies in the future.
10. Accordingly, even if the ISSB does not undertake standard-setting activities, the
ISSB should, over the next two years, conduct research on the work of other standardsetters to ensure comparability and interoperability between other sustainability
disclosure standards.
Developing industry-based disclosure requirements
11. The ISSB is currently in the process of improving the international applicability of
the Sustainability Accounting Standards Board (SASB) Standards. In addition, the
ISSB has stated its intention to make climate-related industry-based guidance
mandatory in the future, although they were issued as non-mandatory guidance inJune 2023.
12. We believe that the ISSB’s goal is to develop a set of industry-based disclosure
requirements within the IFRS Sustainability Disclosure Standards, and enhancing theinternational applicability of the SASB Standards is merely a stepping stone and not
the ultimate goal. Accordingly, we believe that the ISSB should complete its workon enhancing the SASB Standards in this project as quickly as possible and undertakethe development of industry-based disclosure requirements within the IFRS
Sustainability Disclosure Standards. In this context, we believe that the ISSB
would need to consider at a minimum the following areas2:(a) Disclosure objectives of metrics should be clearly stated.
(b) The international applicability of the industry classification should be enhanced.
13. If the ISSB were to undertake a project to develop a set of industry-based disclosure
For details, please refer to the SSBJ’s comments on the ISSB’s Exposure Draft(ISSB/ED/2023/1) ‘Methodology for Enhancing the International Applicability of the SASB®
Standards and SASB Standards Taxonomy Updates’.
2

3 / 24requirements, the ISSB would need to address the two issues described above, which
would require significant time and resources. Accordingly, we suggest the ISSB
determine the priority of this project and add this project to the ISSB’s work plan andallocate sufficient resources. We note that this is likely to be a long-term projectthat will not be completed within the next two years.
Researching targeted enhancements to the ISSB Standards
14. The RFI states that, in addition to the activities to support the implementation of the
ISSB Standards, the ISSB will continue research and consultation to assess the ISSB
Standards for areas of targeted enhancement for the ISSB’s work over the next two
years. Specifically, ‘Table 1—The ISSB’s activities’ of the RFI explains that thiswork could enhance the application of IFRS S2 by providing guidance for thedisclosure of climate-adjacent risks and opportunities related to nature and the ‘justtransition’ to a lower-carbon economy.
15. We are concerned that the ISSB has taken this project for granted.

We believe thatthe scope and objective of this research activity is not clear and do not understandhow this initiative is different from other potential projects. If the ISSB intends to
add disclosure requirements to IFRS S2, we believe it would be appropriate toaddress them as a separate project, just like any other new research or standards
development project. Without further explanation, we do not think this activity
should be given higher priority than the four potential projects discussed in the RFI.
Criteria for assessing potential projects
16. Our understanding is that the criteria proposed in the RFI have been developed withreference to the criteria of the International Accounting Standards Board (IASB).
While the IASB already has a comprehensive set of accounting standards, we think
it is difficult to say that the ISSB has a comprehensive set of IFRS Sustainability
Disclosure Standards, because, as of today, the ISSB has only IFRS S1 and IFRS S2.
17. Accordingly, we believe that even if the ISSB adopts the same criteria as the IASB,
they may not work function well as criteria to determine the priority of new researchand standard-setting projects. For example, if the ISSB applies the criterion‘whether there are any deficiencies in the way companies disclose information on thematter’, it is likely that there would be many deficiencies in the IFRS Sustainability
Disclosure Standards, simply because the ISSB has not yet developed acomprehensive set of IFRS Sustainability Disclosure Standards.

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18. We generally agree that the proposed criteria would be useful once the ISSB has
developed a comprehensive set of IFRS Sustainability Disclosure Standards. Until
then, we propose that the ISSB consider whether the information provided as a resultof the potential project is likely to become a critical element within thecomprehensive set of disclosures provided in accordance with IFRS Sustainability
Disclosure Standards. If the IFRS Sustainability Disclosure Standards are to coversustainability topics comprehensively, it would be appropriate to prioritise theprojects considering the balance of the information related to enterprise value.
Comments on the specific questions
19. For our comments on the specific questions in the RFI, please refer to the Appendix
to this letter. We hope our comments are helpful for the ISSB’s consideration. If
you have any questions, please feel free to contact us.

Yours sincerely,

Yasunobu Kawanishi
Chair
Sustainability Standards Board of Japan

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Appendix
Question 1—Strategic direction and balance of the ISSB’s activities
Paragraphs 18–22 and Table 1 provide an overview of activities within the scope of the
ISSB’s work.
(a)

From highest to lowest priority, how would you rank the following activities?
(i)

beginning new research and standard-setting projects(ii)

supporting the implementation of ISSB Standards IFRS S1 and IFRS
S2

(iii)

researching targeted enhancements to the ISSB Standards(iv)

enhancing the Sustainability Accounting Standards Board (SASB)
Standards(b)Please explain the reasons for your ranking order and specify the types of work
the ISSB should prioritise within each activity.

(c)Should any other activities be included within the scope of the ISSB’s work?
If so, please describe these activities and explain why they are necessary.

Supporting the implementation of IFRS S1 and IFRS S2
20. IFRS Sustainability Disclosure Standards will not automatically become global
standards. Rather, it is for each jurisdiction to decide whether to apply IFRS
Sustainability Disclosure Standards, and the ISSB does not have the authority todetermine who should or could apply them. Accordingly, we believe that IFRS
Sustainability Disclosure Standards must be accepted by jurisdictions around theworld to become truly global standards.
21. While we appreciate the accomplishments of the ISSB in completing IFRS S1 andIFRS S2 in such a short period of time, we are concerned that the standards may not
be well understand by constituents around the world given that the standards weredeveloped in such a short time period. In addition, we note that new issues may be
identified when entities consider their application, given that the two standards are
the first standards to be developed by the ISSB.
22. Accordingly, for the next two years, we are of the view that the ISSB should prioritisethe ‘foundational work’ in paragraph 16(a) of the RFI, in particular, supporting theimplementation of IFRS S1 and IFRS S2. Specifically, as described in ‘Table 1—
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Appendix
The ISSB’s activities’ of the RFI, the ISSB should establish and implement processes,
including work to develop and strengthen of guidance and materials, to support theimplementation of the standards and address the issues identified.
New research and standard-setting projects (potential projects)
23. We agree that the four potential projects identified in paragraph 38 of the RFI,
biodiversity, ecosystems and ecosystem services (BEES), human capital, humanrights and integration in reporting, are all important topics of high priority. In
particular, we suggest that human capital be given the highest priority, based on the
expectations of primary users regarding decision-useful information.
24. For more detailed comments on the potential projects, please refer to our commentson Questions 3 to 7 in this letter.
Developing industry-based disclosure requirements
25. The ISSB is currently in the process of improving the international applicability of
the SASB Standards. In addition, the ISSB has stated its intention to make climaterelated industry-based guidance mandatory in the future, although they were issued
as non-mandatory guidance in June 2023.
26. We believe that the ISSB’s goal is to develop a set of industry-based disclosure
requirements within the IFRS Sustainability Disclosure Standards, and enhancing theinternational applicability of the SASB Standards is merely a stepping stone and not
the ultimate goal. Accordingly, we believe that the ISSB should complete its workon enhancing the SASB Standards in this project as quickly as possible and undertakethe development of industry-based disclosure requirements within the IFRS
Sustainability Disclosure Standards. In this context, we believe that the ISSB
would need to consider at a minimum the following areas:(a) Disclosure objectives of metrics should be clearly stated.
(b) The international applicability of the industry classification should be enhanced.
Disclosure objectives of metrics
27. Our understanding is that one of the reasons the industry-based guidance proposed
in Draft S2 was not well accepted by respondents was that the there was a long listof metrics without a clear explanation of why those metrics were required to bedisclosed. For entities to provide information that is most useful to users, we
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Appendix
believe it is critical that the disclosure metrics are derived from specific disclosure
objectives that are accepted globally.
International applicability of the industry classification
28. Our understanding is that one of the other reasons the industry-based guidance
proposed in Draft S2 was not well accepted by respondents was that there wereconcerns regarding the international applicability of the industry classification.
29. Specifically, the following issues regarding the SASB’s Sustainable Industry
Classification System® (SICS®) need to be addressed:(a) Currently, there is no global consensus on the use of the SICS ® as the industry
classification for sustainability-related financial information. We observe
diversity in the industry classification actually used by financial organisations.
For example, paragraphs B62 and B63 of IFRS S2 require the use of the Global
Industry Classification Standard (GICS).
(b) Because the SICS® only covers industries that are highly affected bysustainability-related risks and opportunities, some entities may find it difficult
to decide which industry they belong to within the SICS®. Additional guidanceon how entities should determine the industry it belongs to within the SICS ®
should be provided.
(c) In Europe, EFRAG is in the process of developing a European industrial
classification system. Interoperability of the industry classification also needs
to be considered to reduce the burden on preparers.
30. We believe that a global consensus needs to be reached on the use of SICS® as theindustry classification for sustainability-related financial disclosures. In any future
project to develop industry-based disclosure requirements within the IFRS
Sustainability Disclosure Standards, the ISSB should also consider the process andmethodology for internationalising the industry classification and expose suchprocess and methodology for public consultation.
Addition to the ISSB’s work plan
31. If the ISSB were to undertake a project to develop a set of industry-based disclosure
requirements, the ISSB would need to address the two issues described above, which
would require significant time and resources. Accordingly, we suggest that the

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Appendix
ISSB determine the priority of this project and add this project to the ISSB’s work
plan and allocate sufficient resources. We note that this is likely to be a long-term
project that will not be completed within the next two years.
Researching targeted enhancements to the ISSB Standards
32. The ISSB states in the RFI that, in addition to the activities to support theimplementation of the ISSB Standards, the ISSB will continue research andconsultation to assess the ISSB Standards for areas of targeted enhancement for the
ISSB’s work over the next two years. Specifically, ‘Table 1—The ISSB’s activities’of the RFI explains that this work could enhance the application of IFRS S2 byproviding guidance for the disclosure of climate-adjacent risks and opportunities
related to nature and the ‘just transition’ to a lower-carbon economy.
33. We are concerned that the ISSB has taken this project for granted. We believe thatthe scope and objective of this research activity is not clear and do not understandhow this initiative is different from other potential projects. If the ISSB intends to
add disclosure requirements to IFRS S2, we believe it would be appropriate toaddress them as a separate project, just like any other new research or standards
development project. Without further explanation, we do not think this activity
should be given higher priority than the four potential projects discussed in the RFI.

Question 2—Criteria for assessing sustainability reporting matters that
could be added to the ISSB’s work plan
Paragraphs 23–26 discuss the criteria the ISSB proposes to use when prioritisingsustainability-related reporting issues that could be added to its work plan.
(a)

Do you think the ISSB has identified the appropriate criteria?

(b)Should the ISSB consider any other criteria? If so what criteria and why?

Criteria for assessing potential projects
34. Our understanding is that the criteria proposed in the RFI have been developed withreference to the criteria of the IASB. While the IASB already has a comprehensive
set of accounting standards, we think it is difficult to say that the ISSB has acomprehensive set of IFRS Sustainability Disclosure Standards, because, as of today,
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Appendix
the ISSB has only IFRS S1 and IFRS S2.
35. Accordingly, we believe that even if the ISSB adopts the same criteria as the IASB,
they may not work function well as criteria to determine the priority of new researchand standard-setting projects. For example, if the ISSB applies the criterion‘whether there are any deficiencies in the way companies disclose information on thematter’, it is likely that there would be many deficiencies in the IFRS Sustainability
Disclosure Standards, simply because the ISSB has not yet developed acomprehensive set of IFRS Sustainability Disclosure Standards.
36. We generally agree that the proposed criteria would be useful once the ISSB has
developed a comprehensive set of IFRS Sustainability Disclosure Standards. Until
then, we propose that the ISSB consider whether the information provided as a resultof the potential project is likely to become a critical element within thecomprehensive set of disclosures provided in accordance with IFRS Sustainability
Disclosure Standards. If the IFRS Sustainability Disclosure Standards are to coversustainability topics comprehensively, it would be appropriate to prioritise theprojects considering the balance of disclosure information related to enterprise value.

Question 3— New research and standard-setting projects that could be
added to the ISSB’s work plan
Paragraphs 27–38 provide an overview of the ISSB’s approach to identifying
sustainability-related research and standard-setting projects. Appendix A describes
each of the proposed projects that could be added to the ISSB’s work plan.
(a)Taking into account the ISSB’s limited capacity for new projects in its new
two-year work plan, should the ISSB prioritise a single project in aconcentrated effort to make significant progress on that, or should the ISSB
work on more than one project and make more incremental progress on eachof them?
(i)

If a single project, which one should be prioritised? You may selectfrom the four proposed projects in Appendix A or suggest anotherproject.

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Appendix
Question 3— New research and standard-setting projects that could be
added to the ISSB’s work plan(ii)

If more than one project, which projects should be prioritised andwhat is the relative level of priority from highest to lowest priority?
You may select from the four proposed projects in Appendix A orsuggest another project (or projects).

Priority of potential projects
37. We agree that the four potential projects identified in paragraph 38 of the RFI are allimportant topics of high priority. In particular, based on the expectations of primaryusers regarding decision-useful information, we suggest that human capital be given
the highest priority. Our reasons include the following:(a) We believe that the information related to human capital should be disclosed insustainability-related financial disclosures. This is because, although humancapital is an essential capital of an entity and is likely to affect its enterprise value,
there is currently little information about human capital in its financial reportthat meets the needs of investors.
(b) It is important to disclose basic information related to human capital, such asheadcount, regardless of whether the entity’s assessment of its risks andopportunities. Strictly following IFRS S1, such basic information may not beprovided by an entity because an entity may conclude that such basic information
does not represent risks or opportunities. Other information, for example, theentity’s efforts to increase its enterprise value (such as recruitment strategy) is
likely to be covered by IFRS S1 but may be part of this project. We believe the
ISSB should undertake research, focusing on whether it is possible to develop astandard requiring disclosure of such basic information, as well as theinformation regarding risks and opportunities.
(c) The basic information referred to above has many disclosure elements that arecommon to all entities, regardless of jurisdiction or entity size. We think theseelements are relatively easier to disclose compared to elements that would be
disclosed as a result of other potential projects proposed by the ISSB.
(d) Information related to human capital can be a common sustainability topic for
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Appendix
almost all entities. Without a new standard, entities will apply IFRS S1, but it
is likely that there will be diversity in how information is provided and a new
standard is warranted to ensure global comparability. Users in our jurisdiction
have particularly stressed this point.
(e) If the IFRS Sustainability Disclosure Standards are to cover sustainability topics
comprehensively, it would be appropriate to prioritise the projects considering
the balance of the information related to enterprise value.
Research over the next two years
38. Sustainability-related financial disclosures are at an early stage of development.
We believe it is important for the ISSB to keep abreast of developments of otherstandard-setters and, where appropriate, to exchange ideas to ensure that thedisclosures in each jurisdiction are aligned as far as possible to achieve comparability
for primary users and interoperability for preparers.
39. We are concerned that, if the ISSB does not undertake any new research in areas
where other standard-setters are developing or have developed standards, newinconsistencies between standards developed by the ISSB and by the other standardsetters will arise, and it is likely that the ISSB would need to resolve theinconsistencies in the future.
40. Accordingly, even if the ISSB does not undertake standard-setting activities, the
ISSB should, over the next two years, conduct research on the work of other standardsetters to ensure comparability and interoperability between other sustainability
disclosure standards.
Disclosure objectives
41. We are of the view that whichever project is chosen, the ISSB should clearly establish
the disclosure objective of the standard and develop disclosure objectives of specificdisclosure requirements in line with the disclosure objectives of the standard. In thelight of the disclosure objectives of specific disclosure requirements, entities candetermine the specific content of their disclosures.

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Appendix
Question 4— New research and standard-setting projects that could be
added to the ISSB’s work plan: Biodiversity, ecosystems and ecosystemservices
The research project on biodiversity, ecosystems and ecosystem services is describedin paragraphs A3–A14 of Appendix A. Please respond to these questions:
(a)

(b)

Of the subtopics identified in paragraph A11, to which would you give thehighest priority? Please select as many as applicable.
Please explain your choices and the relative level of priority with particularreference to the information needs of investors.
You may also suggest subtopics that have not been specified. To help the ISSB
analyse the feedback, where possible, please provide:(i)a short description of the subtopic (and the associated sustainabilityrelated risks and opportunities); and(ii)

your view on the importance of the subtopic with regard to anentity’s sustainability-related risks and opportunities and theusefulness of the related information to investors.

Do you believe that sustainability-related risks and opportunities related to this
topic are substantially different across different business models, economic
activities and other common features that characterise participation in anindustry, or geographic locations such that measures to capture performanceon such sustainability-related risks and opportunities would need to be tailored
to be specific to the industry, sector or geographic location to which they
relate?
Please explain your reasoning and provide examples of how sustainabilityrelated risks and opportunities related to this topic will either be (i)substantially different or (ii) substantially the same across different industries,
sectors or geographic locations.

(c)

In executing this project, the ISSB could leverage and build upon the materialsof the ISSB and other standard-setters and framework providers to expedite theproject, while taking into consideration the ISSB’s focus on meeting the needsof investors. Which of the materials or organisations referenced in paragraph
A13 should be utilised and prioritised by the ISSB in pursuing the project?
Please select as many as applicable.

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Appendix
Question 4— New research and standard-setting projects that could be
added to the ISSB’s work plan: Biodiversity, ecosystems and ecosystemservices
Please explain your choices and the relative level of priority with particularreference to the information needs of investors. You can suggest materials thatare not specified. You can suggest as many materials as you deem necessary.
To help the ISSB analyse the feedback, where possible, please explain why
you think the materials are important to consider.
Scope of the project
42. Paragraph A11 of the RFI suggests that the biodiversity, ecosystems and ecosystemservices (BEES) project could potentially include broader subtopics on water, landuse and land-use change, pollution, resource exploitation and invasive non-native
species.
43. Some disclosures related to these subtopics may not be relevant to investors but to abroader stakeholder group. Because the objective of IFRS S1 is to require an entity
to disclose information about its sustainability-related risks and opportunities that isuseful to primary users of general purpose financial reports in making decisions
relating to providing resources to the entity, we think it is important to focus on
information that enable primary users to understand the effects of sustainabilityrelated risks and opportunities on the entity’s cash flows, its access to finance andcost of capital over the short, medium and long term.
44. To narrow the scope of the BEES project within a manageable scope, we think
resources should be allocated appropriately to the subtopics from the following
perspectives:(a) The focus should be on disclosures for entities with business models that arehighly dependent on or affected by BEES.
(b) Regarding prioritising subtopics, the ISSB should focus on subtopics that are
relevant to a relatively large number of entities. This is because, without a new
standard, entities will apply IFRS S1, but it is likely that there will be diversity
in how information is provided and a new standard is warranted to ensure global
comparability. For subtopics that are relevant to a relatively small number of

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Appendix
entities, we think it would be sufficient that entities disclose information inaccordance with IFRS S1.
(c) Regarding disclosures that may be required in each subtopic, the disclosure
objectives of specific disclosure requirements should be clearly identified.
45. Given the thinking in the previous paragraph, we are of the view that developing
standards regarding disclosures such as invasive non-native species should not be
considered in the ISSB’s new project. For such items not addressed in the ISSB’s
new project, entities will be required to disclose information in accordance with IFRS
S1.
46. Some have suggested that all the subtopics above are related to nature and that it
would be appropriate to label the project as, for example, ‘Nature’ or ‘Natural
Capital’, because the label ‘biodiversity, ecosystems and ecosystem services’ does
not represent these subtopics and may be potentially misleading.
Disclosures on governance and risk management
47. We think it would be useful to disclose the impact on entities of the changes in thenatural environment (that is, those other than climate). In particular, information
regarding the long-term strategies of entities whose business models are highly
dependent on the natural environment is likely to be useful to primary users.
48. However, our understanding is that the degree of dependence on the naturalenvironment varies from industry to industry and from entity to entity. Accordingly,
the risks and opportunities arising from the changes in the natural environment mayvary significantly depending on the entity. In such cases, it would be useful todisclose information that enables primary users to understand whether entities
properly manage and monitor such risks and opportunities in the natural environment.
49. Accordingly, regarding the BEES project, we believe that research should initially
focus on the disclosure of information regarding governance and risk management
for risks and opportunities in the natural environment.
Circular economy
50. Paragraph A11(d) of the RFI includes ‘circular economy’ as a subtopic of BEES.
We agree that it would be useful to disclose information on the efficient use of limited
resources in order to understand the resilience of the business model of an entity that15 / 24

Appendix
is highly dependent on resources. However, we believe that the subtopic of thecircular economy may be broader in scope. Accordingly, the ISSB should consider
addressing circular economy as a stand-alone project.
51. In addition, as with other BEES subtopics, the relevance of the circular economy willvary from industry to industry, and the risks and opportunities may vary significantly
from entity to entity. Accordingly, research should initially focus on the disclosureof information regarding governance and risk management, to provide informationthat enables primary users to understand whether entities are properly assessing risks
and opportunities.

Question 5— New research and standard-setting projects that could be
added to the ISSB’s work plan: Human capital
The research project on human capital is described in paragraphs A15–A26 ofAppendix A. Please respond to the following questions:(a)Of the subtopics identified in paragraph A22, to which would you give thehighest priority? Please select as many as applicable.
Please explain your choices and the relative level of priority with particularreference to the information needs of investors.
You may also suggest subtopics that have not been specified. To help the ISSB
analyse the feedback, where possible, please provide:(i)a short description of the subtopic (and the associated sustainabilityrelated risks and opportunities); and

(ii)

(b)

your view on the importance of the subtopic with regard to anentity’s sustainability-related risks and opportunities and theusefulness of the related information to investors.

Do you believe that sustainability-related risks and opportunities related to this
topic are substantially different across different business models, economic
activities and other common features that characterise participation in anindustry, or geographic locations such that measures to capture performanceon such sustainability-related risks and opportunities would need to be tailored
to be specific to the industry, sector or geographic location to which they
relate?

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Appendix
Question 5— New research and standard-setting projects that could be
added to the ISSB’s work plan: Human capital
Please explain your reasoning and provide examples of how sustainabilityrelated risks and opportunities related to this topic will either be (i)substantially different or (ii) substantially the same across different industries,
sectors or geographic locations.
(c)

In executing this project, the ISSB could leverage and build upon the materialsof the ISSB and other standard-setters and framework providers to expedite theproject, while taking into consideration the ISSB’s focus on meeting the needsof investors. Which of the materials or organisations referenced in paragraph
A25 should be prioritised by the ISSB in pursuing its research? Please selectas many as applicable.
Please explain your choices and the relative level of priority with particularreference to the information needs of investors. You can suggest materials thatare not specified. You can suggest as many materials as you deem necessary.
To help the ISSB analyse the feedback, where possible, please explain why
you think the materials are important to consider.

52. As described in paragraph 37 of this letter, we suggest that human capital should begiven the highest priority, based on the expectations of primary users regarding
decision-useful information.
Consideration of subtopics
53. Paragraph A22 of the RFI states that the human capital project may include sevensubtopics3. However, we believe that there are overlaps among the subtopics, andthe boundaries of the subtopics are not necessarily clear.
Reorganising the subtopics
54. We suggest that the subtopics of human capital projects (and human rights projects)
should be reorganised, for example, from the following perspectives (See paragraphs
55 to 61 of this letter for further details):(a) worker wellbeing (including mental health and benefits), (b) DEI, (c) employee
engagement, (d) workforce investment, (e) the alternative workforce, (f) labour conditions in thevalue chain, (g) workforce composition and costs
3

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Appendix(a) whether the information relates to:(i) the reporting entity’s own workforce; or(ii) the value chain outside the reporting entity(b) whether the information relates to:(i) workers; or(ii) executives(c) whether the information is:(i) basic information, which should be required regardless of the entity’sassessment of its risks and opportunities; or(ii) information related to risks and opportunities identified by the entity(d) whether the information relates to:(i) human rights; or(ii) human capital
Reporting entity vs value chain outside the reporting entity
55. We believe that human capital information can be further categorised into (a)information related to the reporting entity’s own workforce and (b) information
related to the value chain outside the reporting entity. In the standards of otherstandard-setters, requirements related to information about workers in the entity’svalue chain is often prescribed separately from those related to the reporting entity’s
own workforce.
56. We think this is a sensible approach because entities manage risks related to humancapital within and outside of the reporting entity differently. For example, if therisk is in the reporting entity’s value chain outside the reporting entity, the entity may
replace its risky counterparties to reduce the risk. On the other hand, human capitalrisks within the reporting entity may be addressed over time because somejurisdictions have legal and regulatory restrictions on the reporting entity’s own
workforce to protect employee rights.
57. In this context, we suggest that the ISSB consider separately whether workers in the

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entity’s value chain are inside or outside the reporting entity when considering humancapital projects.
Executives as part of human capital
58. While the term ‘workforce’ generally refers to employees, we believe that executives,
who play an important role in creating enterprise value, are also an important elementof the entity’s human capital. In addition, some jurisdictions have different
definitions of ‘senior management’, such as senior executives, board members andemployees. We are concerned that restricting the definition to ‘workforce’ may
reduce the usefulness of the information. Accordingly, we believe that executives
should also be included when discussing human capital.
59. We acknowledge that, regarding information related to executives, some information
may already be provided in the governance disclosures. However, we are of theview that not all the necessary information would be provided in the governancedisclosures and that the information to be provided should be considered in thecontext of human capital management.
Primary users’ information needs on human capital and human rights beyond laws
and regulations
60. Some human capital and human rights standards issued by other standard-settersrequire disclosure of whether or not entities have violated laws and regulations.
However, because most entities would be in compliance with the laws andregulations, compliance disclosures may be boilerplate. In this context, we do notthink such disclosures would be useful to primary users.
61. We believe that primary users expect an entity to disclose the entity’s efforts that go
beyond what is required by the laws and regulations, which may affect the enterprisevalue.
Disclosure requirements on human capital
62. As described in paragraph 37 of this letter, we believe that it is important to disclose
basic information related to human capital, such as headcount, regardless of theentity’s assessment of its risks and opportunities. On the other hand, we believethat it may be difficult to identify all metrics that should be disclosed, because themetrics that are relevant to the entity may differ.

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63. Accordingly, we are of the view that human capital disclosure requirements should
focus primarily on strategy and, where metrics are required, they should be relevantto the metrics that the entity uses and monitors on an ongoing basis. This may
address some of the challenges identified in paragraph A19 of the RFI4. Whenever
the ISSB requires the disclosure of metrics, the disclosure objective of such metrics
should be clearly articulated.
64. Based on the discussions above, regarding human capital, we suggest that the ISSB
conduct research to consider whether to require disclosures such as:(a) Basic information(i) Description of current human capital (for example, headcounts, workforce
composition, remuneration system)(b) Information related to risks and opportunities identified by the entity(i) Governance processes, controls and procedures used to monitor and manage
risks and opportunities related to human capital(ii) Description of short-, medium- and long-term human capital strategies (forexample, recruitment strategy, reskilling strategy), including therelationship with the entity’s overall management strategy(iii) The process of identifying, assessing, prioritising and monitoring risks andopportunities related to human capital(a) the multifaceted nature of human capital management and differences in how risks andopportunities manifest in various business models, economic activities and jurisdictions, (b)legal prohibitions on collecting workforce data in some jurisdictions, (c) competitive
sensitivities, (d) aspects of human capital, such as workplace culture, that can be inherently
difficult to measure, (e) other aspects, such as the use of alternative workforces, automation andartificial intelligence, (f) ambiguity in the role of individual entities in managing related social
impacts
4

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Question 6— New research and standard-setting projects that could be
added to the ISSB’s work plan: Human rights
The research project on human rights is described in paragraphs A27–A37 ofAppendix A. Please respond to these questions:(a)Within the topic of human rights, are there particular subtopics or issues thatyou feel should be prioritised in the ISSB’s research? You can suggest as many
subtopics or issues as you deem necessary. To help the ISSB analyse thefeedback, where possible, please provide:

(b)

(i)

a short description of the subtopic (and the associated sustainabilityrelated risks and opportunities); and(ii)

your view on the importance of the subtopic with regard to anentity’s sustainability-related risks and opportunities and theusefulness of the related information to investors.

Do you believe that sustainability-related risks and opportunities related to this
topic are substantially different across different business models, economic
activities and other common features that characterise participation in anindustry, or geographic locations such that measures to capture performanceon such sustainability-related risks and opportunities would need to be tailored
to be specific to the industry, sector or geographic location to which they
relate?
Please explain your reasoning and provide examples of how sustainabilityrelated risks and opportunities related to this topic will either be (i)substantially different or (ii) substantially the same across different industries,
sectors or geographic locations.

(c)

In executing this project, the ISSB could leverage and build upon the materialsof the ISSB and other standard-setters and framework providers to expedite theproject, while taking into consideration the ISSB’s focus on meeting the needsof investors. Which of the materials or organisations referenced in paragraph
A36 should be prioritised by the ISSB in pursuing its research? Please selectas many as applicable.
Please explain your choices and the relative level of priority with particularreference to the information needs of investors. You can suggest materials thatare not specified. You can suggest as many materials as you deem necessary.

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Question 6— New research and standard-setting projects that could be
added to the ISSB’s work plan: Human rights
To help the ISSB analyse the feedback, where possible, please explain why
you think the materials are important to consider.
Human rights
65. Regarding human rights, we agree that information related to human rights due
diligence within the reporting entity and within the value chain outside the reporting
entity is important. In addition, we note that some have suggested that human rightsof people constituting the community and indigenous rights be included in the topics
to be considered for the human rights project. While we acknowledge theimportance and usefulness of such information, we believe that it is important that
the ISSB should focus on information that enable primary users to understand theeffects of sustainability-related risks and opportunities on the entity’s cash flows, its
access to finance and cost of capital over the short, medium and long term.
66. On the other hand, we think that it is normal for entities to comply with laws andregulations related to human rights and, as such, disclosures related to the entity’scompliance may become boilerplate and thus we do not think such disclosures would
be useful to primary users. We believe that primary users expect entities to disclosethe entity’s efforts that go beyond what is required by the laws and regulations, which
may affect the enterprise value.
67. However, the scope of the human rights project may overlap with the scope of thehuman capital project. Accordingly, if the ISSB were to undertake human capitaland human rights as two separate projects, the boundaries of the two projects should
be clearly stated, and overlap should be avoided to the extent possible.

Question 7— New research and standard-setting projects that could be
added to the ISSB’s work plan: Integration in reporting
The research project on integration in reporting is described in paragraphs A38–A51
of Appendix A. Please respond to the following questions:

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Question 7— New research and standard-setting projects that could be
added to the ISSB’s work plan: Integration in reporting(a)

The integration in reporting project could be intensive on the ISSB’s resources.
While this means it could hinder the pace at which the topical development
standards are developed, it could also help realise the full value of the IFRSFoundation’s suite of materials. How would you prioritise advancing the
integration in reporting project in relation to the three sustainability-related
topics (proposed projects on biodiversity, ecosystems and ecosystem services;human capital; and human rights) as part of the ISSB’s new two-year work
plan?

(b)

In light of the coordination efforts required, if you think the integration inreporting project should be considered a priority, do you think that it should be
advanced as a formal joint project with the IASB, or pursued as an ISSB project(which could still draw on input from the IASB as needed without being aformal joint project)?

(c)

(i)

If you prefer a formal joint project, please explain how you think thisshould be conducted and why.

(ii)

If you prefer an ISSB project, please explain how you think thisshould be conducted and why.

In pursuing the project on integration in reporting, do you think the ISSB
should build on and incorporate concepts from:(i)the IASB’s Exposure Draft Management Commentary? If you agree,
please describe any particular concepts that you think the ISSB
should incorporate in its work. If you disagree, please explain why.

(ii)

the Integrated Reporting Framework? If you agree, please describe
any particular concepts that you think the ISSB should incorporate inits work. If you disagree, please explain why.

(iii)

other sources? If you agree, please describe the source(s) and any
particular concepts that you think the ISSB should incorporate in its
work.

(d)

Do you have any other suggestions for the ISSB if it pursues the project?

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Integration in reporting
68. Given the two-year timeframe, the research project on integration in reporting should
focus on consolidating the IASB’s Exposure Draft of the IFRS Practice Statement on
Management Commentary (ED/2021/6) and the Integrated Reporting Framework.
Although the Management Commentary is an IASB project, given the respective
expertise of the members of the IASB and the ISSB, we believe that the ISSB should
work on the integration of the Management Commentary and the Integrated
Reporting Framework.
Some have noted that the ISSB should align theterminology in IFRS S1 and IFRS S2 and the documents that will be considered inthis project.

Question 8—Other comments
Do you have any other comments on the ISSB’s activities and work plan?

69. We do not have any other comments.

[End of Document]

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