SUSTAINABILITY STANDARDS BOARD OF JAPAN (SSBJ)PUBLIC COMMENT ON EXPOSURE DRAFTSJapanese Sustainability Disclosure Standards
Comment from CDP

July 2024

Summary
CDP applauds the work undertaken by the Sustainability Standards Board of Japan (SSBJ) in draftingand proposing the Japanese Sustainability Disclosure Standards for consultation. The SSBJ’s intention
to align with the global International Sustainability Standards Board’s (ISSB) IFRS S1 & S2 standards is
an important step in providing financial market participants with standardized and globally comparable
data.
The following response from CDP emphasizes the current state of Japanese disclosure through CDP,
along with key insights, data, and expertise with an interpretation of the standards considering
corporate capacity, sectoral, and policy gaps within Japan. Our goal is to provide general and targetedcomments on the development of the SSBJ’s Sustainability Disclosure Standards and share CDP’s
work and future plans in the space in order to provide material assistance. Our experts are available to
the SSBJ for further consultation if needed.

Key recommendations
 Ensure consistency between global base line established by ISSB’s IFRS S1 & S2 and Japanese
Sustainability Disclosure Standards, ensuring Japanese companies are on an equal footing intheir access to sustainable finance as their international peers.
 Ensure implementation guidance and capacity building efforts run in parallel to developmentof Standards to guarantee effective reporting, equitably and responsibly upskill and bridge
potential capacity gaps to disclosure. CDP should be considered a resource for implementation
as well as an important disclosure mechanism.
 Ensure timely implementation of the SSBJ standards and accompanying implementation
strategy to help Japanese companies prepare for the international demand for informationfrom their investors and broader stakeholders. CDP encourages the SSBJ to work together withFinancial Services Agency (FSA) and consider moving from the finalization of the SSBJ
standards directly into mandatory reporting as of 2026.
 Ensure inclusion of Scope 3 reporting requirements in alignment with IFRS S2. Given theJapanese companies’ preparedness, CDP encourages the SSBJ standards to require Scope 3
disclosure from the first year of mandatory reporting.
 Ensure GHG protocol is the preferable method used by Japanese companies to report theiremissions, which can be introduced through a phase-in approach to gradually enable
companies to switch methodologies. This is critical for data analysis and comparability.
Despite the ISSB allowing for the entity to report in accordance with the GHG emission reporting
method required by a jurisdictional authority, CDP recommends the SSBJ standards to ensure
the interoperability and the usefulness of the disclosed information. 46% of companies
disclosing in 2023 from Japan reported using GHG Protocol for their emissions accounting.
 Having “dual reporting” of Scope 2 emissions (Market and Location based) required in the
SSBJ exposure draft is in alignment with the GHG Protocol and also greatly enhances
information on a company’s efforts to reduce their Scope 2 emissions. This is an applaudable

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additional step the SSBJ is taking, to increase the usability and insights on the actions ofJapanese companies in regard to their Scope 2 emissions to their investors.
 IFRS S1 Paragraph B4 and B5 are an essential part of the ISSB Standards as they explain the
resources and relationships of an entity depend on and are affected by its activities andoutputs. These two paragraphs, essential for the correct understanding and measurement of
a company’s risks and opportunities, should be included in the SSBJ standards as prerequisites
for appropriate sustainability disclosures, and not interpreted as a concept of impact
materiality, wrongly excluded from the jurisdictional implementation of ISSB’s global baseline
standards.

CDP and the rationale for commenting on the standards
CDP is a global non-profit that runs the world’s environmental disclosure system for companies, cities,
states and regions. With a 20-year history at the forefront of environmental disclosure, CDP has thelargest and most robust environmental reporting platform with the most comprehensive dataset on
corporate and city action. In 2024, more than 700 Capital Market Signatories representing more than
US$142 trillion in assets requested companies disclose through CDP. During the 2023 CDP disclosure
cycle, 330+ major buyers, with a combined purchasing power of US$6.4 trillion asked their suppliers
to disclose through CDP, 23,000+ companies representing two thirds of global market capitalization
reported through CDP on climate change, forests and water security, alongside 1,100 cities, states andregions.
In Japan, 1,984 Japanese companies disclosed through the CDP Climate Change Questionnaire in
2023, representing 64% of market capitalization of the Tokyo Stock Exchange Prime Market, 90% of
TOPIX 500, and 97% of Nikkei 225. In 2023, 126 Japanese companies were recognized as global
leaders in environmental transparency on CDP A Lists, which is the highest number globally.

Alignment with IFRS S2
CDP’s 2024 questionnaire is aligned with IFRS S2 Climate-Related Disclosures. Together with thedisclosed dataset, the questionnaire provides an effective tool to support companies on their path to
ISSB compliance. By disclosing through CDP from June to September 2024, companies will disclose
data directly to their stakeholders and subsequently the wider global market, including IFRS S2-aligned
climate data. Where CDP questions are related to requirements of IFRS S2, this is referenced under the‘Connection to other frameworks’ section of each question. The CDP questionnaire emphasizes thevalue of comparable and decision useful disclosure to investors with the global baseline while including
building blocks for additional disclosure.
Recent analysis also highlights that more than 50% of Japanese listed companies are alreadyresponding to the vast majority of datapoints in CDP’s questionnaire aligned with IFRS S2, indicatinga high level of preparedness.
Global capital markets need high-quality disclosure to generate a comparable, actionable dataset tobenchmark corporates, manage climate risks in their portfolios, and inform capital allocation. This

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requirement for consistency across jurisdictions was the driving force behind the development of the
ISSB standards and CDP is a powerful lever for making ISSB-aligned climate disclosure a reality in themarket.
It is our intention to integrate all impactful, high-quality global and jurisdictional-level standards
where feasible, and in 2024 we have progressed alignment with the European Sustainability ReportingStandards (ESRS) as well.

High Quality Mandatory Disclosure
In 2023, CDP launched its most recent report on High-Quality Mandatory Disclosure (Shaping HighQuality Mandatory Disclosure: Taking stock and emerging best practice). CDP has identified 10 mainprinciples that should be applied to mandatory disclosure regulation. These principles which can serve
as a compass for policy makers, financial market regulators, and stock exchanges. CDP calls on
policymakers and financial market regulators to embrace the journey towards HQMD policy andregulation at speed.

Comment from CDP on SSBJ Exposure Drafts
In this public consultation response, CDP recommends that the SSBJ ensures a coherent alignment
with ISSB Standards (IFRS S1 & S2) to effectively apply the global baseline in its jurisdiction and delivercomparable and decision-useful information to its stakeholders. Thus, ensuring that sustainability
disclosures place Japanese companies on an equal footing with their global counterparts in its accessto capital, facilitating its transition to a net-zero economy.
Prominently, the SSBJ has a role to play in guaranteeing market readiness for comparable andaccurate sustainability reporting. Through a coherent implementation strategy, focused on capacitybuilding, the SSBJ can ensure Japanese companies are adequately prepared for disclosing in line withinternational standards and upskilled in the face of increasing jurisdictional adaptation of the ISSB
standards globally. While accounting for country-specific considerations is important, guaranteeing
its compatibility with the global baseline set by IFRS S1 and S2 should remain a priority as investors
need coherent and comparable data to properly assess risks and opportunities arising fromsustainability.
The ISSB Standards have embedded transition reliefs to facilitate the transition to mandatory reporting.
We encourage the SSBJ to adopt the ISSB Standards without adding any additional reliefs. As for Scope
3 reporting particularly, the SSBJ can start requiring companies to disclose some of the relevant
categories of Scope 3 emissions given the preparedness of large Japanese companies as showcasedin the following section of our public comment.
CDP encourages the SSBJ to follow the ISSB’s Jurisdictional Guidance and provide its stakeholders
with a roadmap outlining the process for adoption of sustainability reporting standards in Japan, alongwith contextual information on the country’s sustainable finance framework. This contextual overview
would also inform the need for internal interoperability considerations, and possible obstacles thatneed to be overcome such as the enforcement of other Japanese laws that mandate reporting of2024 • Page 3 of 15

environmental data with different reporting periods from the SSBJ standards (e.g. the Act on Promotionof Global Warming Countermeasures).
A contextual overview of Japan’s sustainable finance framework would also help stakeholders
understand the country’s implementation of other necessary policies for the correct management andutilization of the data generated by the SSBJ’s standards, such as the creation of digital spaces for
hosting sustainability-related data disclosures. Another related goal and aspect of effective policy
should be to reduce the perceived reporting burden (disclosure fatigue) through alignment andinteroperability of data. Addressing the potential for globally aligned data tagging (i.e. XBRL) to ensure
the interoperability of data disclosures is an increasing component of other jurisdictional disclosures(i.e. EFRAG and US Securities and Exchange Commission) and CDP.
Finally, reporting through the CDP global disclosure platform can be leveraged as a tool to help
Japanese organizations as they prepare for a new era of mandatory reporting. CDP has been
supporting Japanese companies prepare for the introduction of mandatory sustainability reporting
regulations for many years. By aligning its platform with global standards and frameworks along withjurisdictional regulations and standards, CDP enables organizations to disclose against market andregulatory requirements while ensuring global capital markets and procurement teams have the mostrobust, decision-useful environmental data. This is where CDP’s concept of “Write once, read and use
many” is exemplified.

Recommendation to change mandatory reporting timeline
CDP disclosure data of Japanese companies, which can be found throughout our public comment,shows the high level of maturity for environmental disclosure in Japanese companies. Whileunderstanding that the scope of companies and timeline that the SSBJ standards will be mandatory
are under discussion of the Working Group on Disclosure and Assurance of Sustainability-related
Financial Information of the Financial System Council, CDP encourages the SSBJ to work with the FSA
not to prolong the timeline of the mandatory reporting and thereby the implementation of criticalenvironmental action. CDP proposes the timeline to move from the finalization of the SSBJ standards
directly into mandatory reporting (i.e. mandatory from 2026 onwards if the standards are finalized byMarch 2025).

Evidence box 1: * Almost 2,000 companies in Japan disclosed information through CDP in 2023, out of which
5.7% received an A score (compared to 1.6% globally).
 69% of Japanese companies disclosing to CDP have active emissions reduction targets.
 The percentage of companies listed on the Prime Market of the Tokyo Stock Exchange whohave set company-wide emissions reduction targets and goals increases with familiarity andexperience in disclosure: First-time disclosers report 62%; second-time disclosers report 76%;
and third-time disclosers report 98%. The percentage of companies listed on the Prime Market
who have emissions reduction initiatives sees first-time disclosers with 69%; second-time
disclosers with 78%; and third-time disclosers at 99%.

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 Almost 70% of companies on the TOPIX 500 are reporting most key indicators of climatetransition plans.
 More than 50% of Japanese listed companies are already responding to the vast majority of
datapoints in CDP’s questionnaire aligned with IFRS S2, indicating a high level of
preparedness.
* Based on self-reported data through CDP’s disclosure platform

Requested areas for public comment
In addition to the general comments provided above, CDP is providing targeted feedback at questions
listed by SSBJ. The comments provided from Q4 to Q11: Other (1) are comments on the premise thatSSBJ standards are applied to companies which center their business on constructive dialogue with
global investors (i.e. all or a portion of companies listed on the Prime Market of the Tokyo Stock
Exchange). The comment on Q11: Other (2) is a general comment both on the premise that SSBJ
standards are applied to companies listed on the Prime Market and that the standards are voluntarily
applied to companies other than those mentioned above (e.g. listed companies other than those listedon the Prime Market).
The disclosure standards for large companies (i.e. those listed on the Prime Market) and for SMEs areencouraged to be developed separately. For the listed companies, the disclosure standards should bealigned with the global ISSB standards and meet global investors’ demand on comparable and useful
information, which should be achieved by this SSBJ standards currently open to consultation.

Q4: Do you agree with the proposal on allowing companies to report GHG emissions for different
periods from sustainability-related financial disclosures if they are subject to the Act on Promotionof Global Warming Countermeasures?
CDP is concerned with the loophole which effectively creates a different reporting period on GHG
emissions for some Japanese companies, deviating from the global baseline established by ISSB withthe endorsement of IOSCO. The ISSB Standards were created with the vision of offering one baselineof comparable data across different jurisdictions. The Standards offer an opportunity for companies
to align sustainability reporting practices all over the world, allowing financial market participants toreceive financial and non-financial data in a timely and comparable manner, which greatly enhances
the transparency and consumption of such data, as highlighted by IOSCO’s decision to endorse ISSB
standards.
While the SSBJ EDs require an entity to report its emissions in accordance with the Greenhouse Gas
Protocol: A Corporate Accounting and Reporting Standard (2004), they also allow the entity to report inaccordance with the Act on Promotion of Global Warming Countermeasures. In this specific case, thisflexibility in reporting requirements risks jeopardizing the establishment of the global baseline, as the
Act on Promotion of Global Warming Countermeasures follows a different approach, leading to data
inconsistencies. If an entity with a reporting period ending at the end of March were to report at theend of July in accordance with the Act, the reporting period for sustainability-related financial

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information and associated financial statements, and the calculation period for reporting GHG
emissions would differ by up to 15 months. Ensuring the same reporting period for financial and nonfinancial data is critical for data analysis and comparability. The SSBJ standards need to ensure theusefulness of the disclosed information to avoid creating market confusion and placing an
unnecessary burden on Japanese companies.

Evidence box 2: *
 46% of companies disclosing in 2023 from Japan reported using GHG Protocol for theiremissions accounting.
* Based on self-reported data through CDP’s disclosure platform

Q5: Do you agree with the proposal on the disclosure of location-based and market-based Scope 2
emissions?
The GHG Protocol Scope 2 Guidance introduces “dual reporting” duties for an entity that operates inmarkets such as Japan where contractual instruments are available. The entity shall report Scope 2
figures in two ways, using both the location-based method and the market-based method.
Going beyond the ISSB global baseline, the SSBJ ED’s proposal for dual reporting will greatly increasedecision-useful information for investors. Disclosure on market-based Scope 2 emissions would
greatly enhance investors overview over a company’s efforts to reduce its Scope 2 emissions. It also
incentivizes companies to implement the right governance mechanisms to collect highly relevant data
for the reduction of its Scope 2 emissions.
To align with the GHG Protocol, CDP recommends that reporting entities perform dual reporting of
Scope 2 emissions: market and location based. Additionally, CDP encourages companies to refer to its
climate reporting guidance for further guidance on how to perform and report these calculations.

Q7: Do you agree with the proposal on the disclosure of metrics on climate-related risks andopportunities? (Climate ED paragraph 80-82)
While qualitative information on climate-related risks and opportunities is important, quantitative
information is most valuable to investors in understanding the impact on an entity’s financial position,
financial performance, and cash flows. Therefore, CDP encourages the SSBJ to keep the ISSB
requirement for quantitative information to guarantee investors access to decision-useful data.
In addition to mandating the disclosure of quantitative information, the SSBJ could also encourage thedisclosure of qualitative information that help investors understand how they arrived at its reported
quantitative values. This type of increased transparency would be a welcome addition to the ISSB
standards and would strengthen investor’s understanding of risks and opportunities associated withJapan’s transition.
Most of the large Japanese companies already disclosed the quantitative information. In 2023, 90% of
Nikkei 225 and 76% of TOPIX 500 disclosed quantitative information on financial effects of climate2024 • Page 6 of 15

related risks to CDP. Of companies listed on the Prime Market of the Tokyo Stock Exchange, thedisclosure rate was 47%, increased considerably from 33% in 2022. Furthermore, the percentage ofcompanies listed on the Prime Market who disclosed quantitative information on financial effects ofclimate-related risks increases with familiarity and experience in disclosure: First-time disclosers
report 49%; second-time disclosers report 63%; and third-time or more disclosers report 90%.

Evidence box 3: *
 76% of companies disclosing in Japan have identified climate-related risks, also 76% ofcompanies disclosing in Japan have identified climate-related opportunities.
 90% of Nikkei 225 and 76% of TOPIX 500 disclosed quantitative information on financial
effects of climate-related risks.
 Disclosers of quantitative information on financial effects of climate-related risks increases
with familiarity and experience in disclosure: First-time disclosers report 49%; second-time
disclosers report 63%; and third-time or more disclosers report 90%.
* Based on self-reported data through CDP’s disclosure platform

Q9: Do you agree with the proposal on the disclosure of internal carbon price (ICP)?
Internal carbon price (ICP) is a powerful tool to assess and manage climate-related risks andopportunities that may arise from the transition to a low-carbon economy. Assigning a monetary value
to the cost of carbon emissions helps companies monitor and adapt their strategies and financial
planning to real-time and potential future shifts in the external market.
The latest report on Scope 3 supply chain emissions published by Boston Consulting Group (BCG) and
CDP, “Scope 3 Upstream: Big Challenges, Simple Remedies'” also found that companies setting the ICP
in decision-making demonstrated better performance in managing Scope 3 emissions. Companies
with an ICP are 3.7 times more likely to have a Scope 3 target and 1.5°C-aligned Scope 3 transition plan,and companies with the ICP integrated into all business decisions are 4.1 times more likely to have a
1.5°C-aligned transition plan and 3.5 times more likely to have climate-related requirements in their
supplier contracts.
Over the past few years, CDP has been tracking a steady increase in the number of companies
embedding the ICP into their business strategies. According to CDP data, the number of Japanesecompanies listed on the Prime Market of the Tokyo Stock Exchange which have an ICP increased from
202 in 2022 to 269 in 2023, and the number of companies reporting they planned to have an ICP in thenext two years increased from 289 in 2022 to 361 in 2023. Global growth in ICP setting is largely
correlated with the parallel development of regulations that directly or indirectly price carbon and theincreasing pressure from stakeholders for increased action on climate-related risks and opportunities.
Companies disclose a variety of approaches to determining ICP levels depending on the intended
objective. Differences relate to the consideration of factors such as geography, time horizon, andbusiness unit. To assess the quality of such approaches, investors need to understand why and how
ICP is used as a tool to assess and manage carbon-related risks and opportunities within a business’s

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operations, supply chain, and investments. Due to competitiveness concerns, some companies do notdisclose the actual price levels used; however, investors find this information useful.1 When combinedwith the methodology used to determine the price, it provides investors with a clear picture of acompany’s management of their climate-related risks and opportunities. CDP recommends thedisclosure of carbon prices as a key metric for determining the correct measurement of key market
risks and opportunities associated with climate-change.
In 2023, 273 Japanese companies listed on the Prime Market of the TSE disclosed the actual prices
used. To support the disclosure, CDP offers guidance materials such as CDP Corporate Questionnaire
and Reporting Guidance and CDP Technical Note - Carbon Pricing: CDP Disclosure Best Practice.

Q10: Do you agree with the proposal on the transition relief?
CDP applauds the SSBJ EDs requirement that an entity reports its sustainability-related disclosures atthe same time as its financial statements.
We recognize that some transition relief is necessary to allow time to build required capacity and fillknowledge and data gaps that exist. However, extending that transition relief beyond what has alreadybeen proposed in the SSBJ EDs disadvantages Japanese companies in their access to sustainablefinance solutions that will accelerate their transition to a low carbon, nature-positive economy. Without
comparable data, investors won’t be able to assess Japanese companies transition accurately. This
lack of clarity will certainly influence the allocation of capital towards transition projects and activities
in Japan.
In case additional transition reliefs extend well beyond those proposed by the ISSB Standards, theinformation gap between Japanese and foreign organizations would increase significantly. The
situation is exemplified by the entry into force of the European Union’s Corporate Sustainability
Reporting Directive (CSRD), which demands disclosures from large market-listed companies operatingin the EU market from 2025, reporting year 2024.
From a global environmental goals perspective as well, extending the transition relief beyond what is
proposed by ISSB could negatively impact the time horizons and targets governments are operating
against as it relates to their respective net-zero commitments. Lastly, we highlight that further
extensions are not rooted in science, as the most recent Intergovernmental Panel on Climate Change(IPCC) Synthesis Report from 2023 highlights the imminent need for action from policymakers increating an enabling environment for transition through regulation and implementation guidelines that
effectively help drive capital flows and mitigate the worst potential effects of climate change.2

1 https://cdn.cdp.net/cdp-production/cms/guidance_docs/pdfs/000/001/567/original/CDP-technical-

note-carbon-pricing.pdf?1523952114
2 https://www.ipcc.ch/report/ar6/syr/downloads/report/IPCC_AR6_SYR_SPM.pdf

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Q11: Other (1) – Scope 3
Identifying and calculating Scope 3 emissions is essential for an entity to take necessary actions to
reduce them. The latest report on the supply chain Scope 3 emissions highlights that Scope 3
emissions are 26 times higher than an entity’s Scope 1 and 2 emissions combined. 3 Whileacknowledging the challenges on reporting Scope 3 emissions, CDP data shows that many of large
Japanese companies have been building their capacity for the reporting. In 2023, 74% of TOPIX 500
and 89% of Nikkei 225 disclosed to CDP that more than 10 of Scope 3 categories are ‘Relevant,calculated’; ‘Not relevant, calculated’ and/or ‘Not relevant, explanation provided’. 58% of companies
listed on the Prime Market of the Tokyo Stock Exchange reported at least one category of Scope 3
emissions.
CDP has also seen a positive trend when comparing first-time and repeat disclosers. The percentage
of companies listed on the Prime Market of the TSE who disclosed more than 10 categories of Scope
3 emissions increases with familiarity and experience in disclosure. First-time disclosers report 36%;
second-time disclosers report 54%; and third-time or more disclosers jump to 91%. Furthermore, thepercentage of companies listed on the Prime Market who disclosed more than 13 categories of Scope
3 emissions sees the first-time disclosers with 27%; second-time disclosers with 45%; and third-timeor more disclosers at 82%.
The increase in global mandatory sustainability reporting regulations will enhance capacity forgathering and disclosing Scope 3 emissions.
CDP understands there is a need for differentiated treatment between large and listed companies, andsmall and medium sized companies (SMEs). In order to appropriately address capacity differences,
CDP has developed a simpler version of its questionnaire dedicated at small and medium enterprises(SME). CDP has been focusing on capacity building Japanese SMEs through its Supply Chain program
since 2008. Examples of our capacity-building efforts are the Supply Chain Member Guidance on Scope
3 reporting and the Technical Note on Scope 3 Relevance by Sector.
When considering transition reliefs, we encourage the SSBJ to take stock of the developments ofmandatory reporting regulations globally. The European Sustainability Reporting Standards (ESRS),
which extend beyond the requirements embedded in IFRS S1 and S2, will demand sustainability
information from 2025, FY 2024, for very large undertakings, and from 2026 to all others. Listed SMEs
will start reporting sustainability information from 2028, and the EU created a set of voluntary reporting
requirements for non-listed SMEs (VSME Standard), which will greatly enhance the collection of data
and the understanding of value chain impacts in Europe. Additionally, we highlight that all Japanesecompanies with substantial operations in the EU will have to comply or be indirectly impacted by ESRS
either from 2025 or 2028 at the latest. The timely implementation of Japanese sustainability reporting
standards and accompanying implementation strategy will help Japanese entities prepare for theinternational demand for information from their customers and broader stakeholders.
CDP agrees with SSBJ’s prioritization of direct measurement, which echoes high ambition and global
recommendations. However, it is understandable that in some occasions access to data may bedifficult, especially in the first years of global standards implementation. Therefore, standards may
3 https://www.cdp.net/en/supply-chain/cdp-bcg-scope-3-report

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allow for the use of alternate means of measurement (i.e. modeling), but only when direct
measurement is either not feasible or overly burdensome. International standards and regulations
requiring Scope 3 disclosure (e.g. ESRS) will have an effect on the demand for this information withincreasing regularity.
Lastly, we emphasize that careful consideration is needed with regards to the use of proxies. Proxies
that follow widely different methodologies will lead to widely different results, having a negative effecton the efforts to establishing a global baseline for comparability of sustainability information. It is
important that the SSBJ provides clear market guidelines for the use of proxies and guarantee anadequate implementation through the release of guidance materials, making sure entities are reporting
responsibly and finance is reaching Japanese companies in an equitable and just way.

Evidence box 4: *
 More than 1,100 companies in Japan disclosure on (some of) their Scope 3 emissions.
 74% of TOPIX 500 and 89% of Nikkei 225 disclosed to CDP that more than 10 of Scope 3
categories are ‘Relevant, calculated’; ‘Not relevant, calculated’ and/or ‘Not relevant,explanation provided’. 58% of companies listed on the Prime Market of the Tokyo Stock
Exchange reported at least one category of Scope 3 emissions.
 The percentage of companies listed on the Prime Market who disclosed more than 10
categories of Scope 3 emissions increases with familiarity and experience in disclosure. Firsttime disclosers report 36%; second-time disclosers report 54%; and third-time or more
disclosers jump to 91%. Furthermore, the percentage of companies listed on the Prime Market
who disclosed more than 13 categories of Scope 3 emissions sees the first-time disclosers
with 27%; second-time disclosers with 45%; and third-time or more disclosers at 82%.
* Based on self-reported data through CDP’s disclosure platform

Q11: Other (2) - IFRS S1 Paragraph B4 and B5
The SSBJ ED did not include paragraphs corresponding to IFRS S1 B4 and B5 because “[each]paragraph explains the concept of impact materiality”, according to the ‘Table of Concordance between
IFRS Sustainability Disclosure Standards and the SSBJ Exposure Draft’ published by the SSBJ.
We would like to highlight that these two paragraphs are an essential part of the ISSB Standards as
they explain the resources and relationships of an entity depend on and are affected by its activities
and outputs. This relationship can take various forms and can be both internal and external to the entity(B4). Furthermore, these paragraphs elucidate that effects are not limited to direct engagement, butalso to those throughout the entity’s value chain (B5).
The explanation provided by these two paragraphs is essential for the correct understanding andmeasurement of a company’s risks and opportunities. Therefore, these two paragraphs should be
included in the SSBJ standards as prerequisites for appropriate sustainability disclosures, and notinterpreted as a concept of impact materiality, wrongly excluded from the jurisdictional implementationof ISSB’s global baseline standards.

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Evidence box 5: *
 75% of Japanese companies state they use scenario analysis to inform their strategy. Out of
which almost two thirds use both, qualitative and quantitative.
 See evidence box 3 for climate- risks and opportunities related information.
* Based on self-reported data through CDP’s disclosure platform

Additional
recommendationsfor
Sustainability Standards in Japanenhancing

futureThe ISSB-aligned standards exposure drafts are a great first step for driving the global baseline forclimate disclosure, to emphasize the need for climate-related data for financial market actors, supply
chain management, governments, civil society and many more. The adoption of these standards will
create a level playing field for large corporations on public climate information. Yet, the global baseline
does not constitute the full information needed, to inject climate and environmental action towards
1.5°C, nature positivity and resilience.
CDP welcomes regulation, standards and guidelines to drive forward voluntary and mandatory
disclosure across climate and nature topics.

Implementation and Guidance Materials
With regards to the implementation and guidance materials to be issued by the respective government
body (SSBJ, FSA or other governmental body or ministry), one straightforward way of preparing
Japanese companies for sustainability disclosure is through the incentivization of disclosuresthrough the CDP global platform. Having run the world’s only independent environmental disclosuresystem for over 20 years, CDP’s questionnaire, together with the disclosed dataset, is an established,trusted tool that supports organizations on their path to ISSB compliance. Our organization has arecord of success in driving the adoption of disclosure frameworks and standards through ourplatform. In 2018, CDP’s alignment was a primary driver behind the mainstreaming of TCFD-aligned
reporting globally, which subsequently informed the first wave of mandatory disclosure regulation. In
the five years following, TCFD-aligned disclosure through CDP increased by more than 400%.
Going forward, CDP will also enhance its substantial alignment with TNFD. These developments will
put Japanese companies disclosing through CDP on a path for successful disclosure against the
mandatory national requirements. By disclosing through CDP, companies in Japan where the highest
number of TNFD Early Adopters sit, will have a head start in providing consistent, globally comparable
TNFD-aligned information to investors and decision-makers. CDP provides the globally accessible
platform for its implementation and a means to track its uptake across the economy.

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Disclosure of SMEs
A significant majority of Japanese businesses, specifically 99.7%, are small and medium-sizedenterprises (SMEs). In response to the unique needs of SMEs globally, in April 2024, CDP introduced a
dedicated SME corporate questionnaire. This new questionnaire aligns with the full corporate version
but features fewer data points, simplified question formats, and enhanced guidance to reduce thereporting burden on SMEs.
The SME corporate questionnaire, which replaces the previous minimum version corporate
questionnaire and the pilot private markets SME questionnaire, benefits from CDP's collaboration with
the SME Climate Hub and the SME Climate Disclosure Framework. Both the SME corporate and full
corporate questionnaires will be accessible through a newly streamlined CDP Portal. Designed toaccommodate SMEs at various stages of maturity, the questionnaire provides the necessary flexibility
to help them identify key focus areas while also presenting enough challenge to build knowledge andpromote actionable steps. By incentivizing disclosure, the questionnaire encourages SMEs to engage
in their environmental journey, supported by comprehensive guidance to navigate the ecosystem ofavailable resources and best practices.
To address the risk of a proliferation of SME questionnaires from large corporates seeking value chain
impact data, the SSBJ can play a crucial role. By developing a separate, voluntary SME standard, andincentivizing SME disclosure through CDP, the SSBJ can facilitate the collection of data through acentralized and standardized format. Such an approach is essential for companies to fully understandtheir value chain impacts, particularly for SMEs outside capital markets, and ensures that disclosure
remains a manageable and beneficial process for SMEs. Interoperability of standards, which includes
voluntary SME standards, remains key.

The role of disclosure regulation driving good governance of transition planning
Transition plans are an essential part of sustainability reporting. It is the culmination of a company’s
reporting exercise and encourages companies to think strategically. Further, it provides essential data
to investors. Thus, transition plans should be included into prudential and non-prudential regulation.
Credible transition plans aligned with 1.5°C are paramount to serving as a decision tool for investors
and purchasing companies engaging with their supply chains.
The strategy and decision-making process established on paragraph 28, 29 and subsequent
requirements of the SSBJ Climate ED should include the implementation and reporting of transition
plans that are in alignment with the Paris Agreement and that focus on the compatibility of businesses
undertaking a 1.5°C scenario and the objective to achieve net-zero. The absence of such alignment in
the proposed standards may leave entities vulnerable to systemic risks, potentially leading todisorderly, insufficient and delayed transition plans.
For entities to have credible and comprehensive transition plans, the SSBJ standards should expressly
detail that the climate-related transition plan information should include the following elements:
 Governance: The best practice in transition plan implementation should request thatorganizations also demonstrate they have board-level oversight of the climate transition planand that there are defined governance mechanisms in place to ensure implementation of the2024 • Page 12 of 15

plan. Furthermore, to incentivize conscious action and commitment in realizing the plan’s goals,
it is recommended that executive management incentives are aligned with the entity climatetransition plan goals.
 Scenario Analysis: A transition plan should be underpinned by robust scenario analysis to
identify potential substantive climate-related risks and opportunities.
 Financial Planning: As part of its strategy to achieve net zero, an entity should outline timebound financial planning details of its transition (e.g., Capital Expenditure, Operating
Expenditure, Revenue, etc.).
 Value Chain Engagement & Low-Carbon Initiatives: A transition plan should include time-boundactions tied to business processes (and those of its value chain), with time-bound KPIs.
 Policy Engagement: A transition plan should demonstrate that an entity’s public policy
engagement aligns with its climate and nature commitments and strategy.
 Risks and Opportunities: A transition plan should outline an organization’s process foraddressing identified climate and nature related risks and maximizing substantive climaterelated opportunities.
 Targets: A transition plan should contain time-bound, verified science-based targets that are inline with the latest science (e.g. institutions should set near-term SBTs to halve emissions by
2030 and should also set a net zero long-term target – by 2050 at the latest).
 Scope 1, 2, & 3 accounting with verification: A transition plan should be accompanied by anannual Scope 1, 2 & 3 emissions inventory that is complete, accurate, transparent, consistent,
relevant, and verified by a third party.
 Connection to a Sustainable Finance Taxonomy: Considering the growing investor concern
over non-substantiated sustainability claims (greenwashing), CDP recommends including clear
links between the information disclosed through transition plans and the alignment with a
Sustainable Finance Taxonomy. In doing so, undertakings can demonstrate and support theiralignment of expenditure with decarbonization targets. Forward-looking metrics such as CapExalignment are especially useful for investors in assessing the credibility of a company’stransition. We have recently published a pioneer report entitled “Stronger Together: Exploring
the EU Taxonomy as a Tool for Transition Planning” which highlights, through analysis of CDP
disclosure data, the importance of this relationship.
In June 2024, CDP launched its most recent report on Transition Plan (The State of Play 2023: Climate
Transition Plan Disclosure). When assessed for credible climate transition plan disclosure in 2023,
Japan was the leader for the third year in a row, with 32 organizations credibly disclosing their climatetransition plans – double the number of disclosures from last year.

2024 • Page 13 of 15

Availability of sustainability reported information
The information to be reported under the Japanese Sustainability Disclosure Standards is expected tobe made available to data users through the public database EDINET hosted by the FSA. The
implementation of the Japanese Sustainability Disclosure Standards should be followed by arequirement that ensures interoperability of the data disclosed with that of data disclosed in otherjurisdictions, which is essential for aggregating data and making it useable for policymakers andinvestors. The FSA should provide investors with seamless access to financial and sustainabilityrelated company information. Ideally, to the greatest extent possible, building on existing national IT
infrastructure to avoid adding to companies' reporting burden. All information should be provided incomparable digital formats.
CDP believes that, as non-financial reporting gets integrated into mainstream reports, there is a needto increase efficiency, save costs and standardize outputs. In order to avoid adding to companies'
reporting burden, all information should be provided in comparable digital formats. In September 2023,
CDP announced a partnership with XBRL International. We collaborate to expand and enhance CDP’s
digital capacity and data collection activities, and to embed XBRL best practices into CDP’s global
environmental disclosure system.

2024 • Page 14 of 15

For further information
General inquiries
policy@cdp.net

CDP Government Partnerships
governmentpartnerships@cdp.net

Moka Yamagata
Policy Engagement Manager,
Japan / Major Economies
moka.yamagata@cdp.net

Mona Freundt
Associate Director Policy Engagement,
Major Economies
mona.freundt@cdp.net

Darren McCrate
Senior Manager, Policy Engagement,
North America / Major Economies
darren.mccrate@cdp.net

Guilherme Cassaro
Policy Manager,
Standards & Frameworks
guilherme.cassaro@cdp.net

Tatiana Díaz
Lead Standards & Frameworks
Policy & External Affairs
tatiana.diaz@cdp.net

Miyako Enokibori
Associate Director,
Disclosure Japan
miyako.enokibori@cdp.net

Pietro Bertazzi
Director of Policy & External Affairs
pietro.bertazzi@cdp.net

About CDP
CDP is a global non-profit that runs the world’s environmental disclosure system for companies, cities, states and regions.
Founded in 2000 and working with more than 740 financial institutions with over $136 trillion in assets, CDP pioneered using
capital markets and corporate procurement to motivate companies to disclose their environmental impacts, and to reducegreenhouse gas emissions, safeguard water resources and protect forests. Over 24,000 organizations around the world
disclosed data through CDP in 2023, with more than 23,000 companies – including listed companies worth two thirds global
market capitalization - and over 1,100 cities, states and regions. Fully TCFD aligned, CDP holds the largest environmental
database in the world, and CDP scores are widely used to drive investment and procurement decisions towards a zero carbon,
sustainable and resilient economy. CDP is a founding member of the Science Based Targets initiative, We Mean BusinessCoalition, The Investor Agenda and the Net Zero Asset Managers initiative. Visit cdp.net or follow us @CDP to find out more.

CDP Government Partnerships
CDP Government Partnerships are designed for governments to actively encourage ambitious actions by corporates andsubnational jurisdictions and to improve data and insights on these organizations' transition to a 1.5°C and nature positive
world. By endorsing the CDP disclosure system, governments can accelerate the implementation of international and national
climate and nature targets by corporates and subnational jurisdictions in their country and drive faster progress towards
achieving climate neutrality and full recovery of nature by 2050.
The CDP Government Dashboard, an interactive, online CDP data tool for governments, provides governments with directaccess to data insights on corporate and subnational environmental action at national or jurisdictional level.

Important NoticeThis document constitutes a non-legal and non-exhaustive guide to regulatory requirements and how reporting through CDP can help CDP stakeholders meet some of theserequirements.
The contents of this report may be used by anyone provided acknowledgment is given to CDP. This does not represent a license to repackage or resell any of the data reported to CDP or thecontributing authors and presented in this report. If you intend to repackage or resell any of the contents of this report, you need to obtain express permission from CDP before doing so. CDP has
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the extent permitted by law, CDP does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on theinformation contained in this report or for any decision based on it. All information and views expressed herein by CDP are based on their judgment at the time of this report and are subject tochange without notice due to economic, political, industry and firm-specific factors. Guest commentaries, where included in this report, reflect the views of their respective authors; their inclusion
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