18 July 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 Exposure Draft (ISSB/ED/2023/1)
Methodology for Enhancing the International Applicability of the SASB® Standards
and SASB Standards Taxonomy Updates
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 Exposure Draft (ISSB/ED/2023/1) Methodology for Enhancing theInternational Applicability of the SASB® Standards and SASB Standards Taxonomy
Updates (‘the Methodology ED’), 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.
Developing industry-based disclosure requirements
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
Disclosures1, we think there are many issues that the ISSB needs to address if the
In 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
1

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ISSB were to incorporate the Sustainability Accounting Standards Board (SASB)
Standards into the IFRS Sustainability Disclosure Standards. In this context, wewelcome the publication of the Methodology ED and the request for comments toenhance the international applicability of the SASB Standards.
4. However, we believe that the ISSB’s goal is to develop a set of industry-based
disclosure requirements within the IFRS Sustainability Disclosure Standards, andenhancing the international applicability of the SASB Standards is merely a steppingstone and not the ultimate goal. Accordingly, we believe that the ISSB should
complete its work on enhancing the SASB Standards in this project as quickly as
possible and undertake the development of industry-based disclosure requirements
within the IFRS Sustainability Disclosure Standards. In this context, we believethat 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
5. 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
believe it is critical that the disclosure metrics are derived from specific disclosure
objectives that are accepted globally.
International applicability of the industry classification
6. 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.
7. The Methodology ED does not include the ISSB’s process for reviewing the SASB’s
Sustainable Industry Classification System® (SICS®). However, we are of the viewthat the following issues regarding the SICS® need to be addressed:

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.’
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(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 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.
8. 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.
9. If the ISSB were to undertake a project to develop a set of industry-based disclosure
requirements, the ISSB would need to devote significant time and resources.
Accordingly, we suggest the ISSB determine the priority of this project within theoverall activities of the ISSB.
10. Our comments on this point will be submitted separately in the comment letter on the
ISSB’s Request for Information 2023 (ISSB/RFI/2023/1) Consultation on Agenda
Priorities, and we expect that they will be read together with our comments in thisletter.
Opportunity to comment on the amended SASB Standards
11. The ISSB will amend the non-climate-related SASB Standards metrics in accordancewith the methodology established in this project to enhance the international
applicability of the SASB Standards.

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12. Under IFRS S1, entities are required to refer to and consider the applicability of theamended SASB Standards. Naturally, stakeholders are more interested in the actual
wording of the SASB Standards as amended by applying the establishedmethodology rather than the methodology itself.
13. Accordingly, we urge the ISSB to expose the amended SASB Standards in their
entirety, and to allow stakeholders to comment on them before they are finalised.
Reflecting amendments in the climate-related industry-based guidance and theclimate-related SASB Standards metrics
14. Upon issuance of IFRS S2, the ISSB amended its climate-related metrics included in
the industry-based guidance and the climate-related SASB Standards metrics.
However, we note that, depending on the comments received on the Methodology
ED and subsequent redeliberations by the ISSB, the ISSB may need to revisit theindustry-based guidance in IFRS S2 and the climate-related SASB Standards metrics
and may need to amend the guidance again.
Comments on the specific questions
15. For our comments on the specific questions in the Methodology ED, please refer tothe 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—Methodology objective
This Exposure Draft describes the proposed methodology to amend non-climaterelated SASB Standards metrics to enhance their international applicability when they
contain a jurisdiction-specific reference.
(a)

Are the scope of the intended enhancements and the objective of the proposed
methodology stated clearly in paragraph 8? If not, why not?

(b)

Are the constraints of the objective as listed in paragraph 8 (preserving
structure and intent, decision-usefulness and cost-effectiveness) appropriate?
Why or why not?

(c)Should any other objective(s) or constraint(s) be considered in the proposed
methodology? If so, what alternative or additional objective(s) or constraint(s)would you suggest? How would these add value to the proposed methodology?

Reflecting amendments in the climate-related industry-based guidance and theclimate-related SASB Standards metrics
16. The methodology proposed in this Methodology ED is intended to enhance theinternational applicability of non-climate-related SASB Standards metrics.
17. Upon issuance of IFRS S2, the ISSB amended its climate-related metrics included in
the industry-based non-mandatory guidance and the climate-related SASB Standards
metrics. However, we note that, depending on the comments received on the
Methodology ED and subsequent redeliberations by the ISSB, the ISSB may need torevisit the industry-based non-mandatory guidance in IFRS S2 and the climaterelated SASB Standards metrics and may need to amend the non-mandatory guidance
again.
Methodology for the revision of current guidance
18. As the Methodology ED correctly points out, the Revision Approaches areapproaches to revise current guidance so that jurisdiction-specific guidance istransformed into internationally applicable guidance and, therefore, we believe thatthe proposed methodology should be applied for this purpose only. While thethinking underlying the Revision Approaches (including the ordering of the Revision
Approaches) may be useful in developing future industry-based disclosure
requirements within the IFRS Sustainability Disclosure Standards, we believe the
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Appendix
methodology for developing future disclosure requirements should be developed
separately and that the ISSB should make this point clear.
19. For example, in developing future requirements, the ISSB should not remove
disclosure metrics as in Revision Approach 4 or seek alternative as in Revision
Approach 5. As we comment in paragraphs 31 to 33 of this letter, Revised
Approaches 1-3 should also be applied as appropriate to the specific circumstancesand should not be applied in descending order of preference.
20. We note that the Methodology ED starts with current guidance and, therefore, does
not discuss which metrics may be missing in current guidance in the international
context. We believe that the ISSB should consider adding metrics when it develops
future industry-based disclosure requirements within the IFRS Sustainability
Disclosure Standards and should prioritise the development of such requirements
over making improvements to the SASB Standards.

Question 2—Overall methodology
This Exposure Draft explains the proposed methodology to amend the SASB Standards
metrics to enhance their international applicability when they contain jurisdictionspecific references.
(a)

Do you agree that the proposed methodology would enhance the international
applicability of the SASB Standards metrics? If not, what alternative approach
do you suggest and why?

21. We believe that the ISSB’s goal is to develop a set of the 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. Please refer to our response to Question 5.

Question 3— Revision approaches
The Exposure Draft explains five revision approaches to enhance the international
applicability of non-climate-related SASB Standards metrics. Every disclosure topic,

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Appendix
Question 3— Revision approaches
metric and technical protocol amended using the methodology will apply these fiverevision approaches, either individually or in combination. The methodology begins
with Revision Approach 1, which uses internationally recognised frameworks andguidance to define relevant terms of reference.
(a)

Do you agree that replacing jurisdiction-specific references withinternationally recognised frameworks and guidance—if identified—should be
the first course of action? If not, why not?

(b)

If Revision Approach 1 is not feasible, do you agree that using the remaining
four revision approaches would enhance the international applicability of the
SASB Standards? Why or why not?

(c)

Could the revised metrics resulting from any specific revision approaches or
combination of approaches pose problems for the preparers applying them?
Why or why not?

(d)

Do you agree with the criteria for determining which of the proposed revision
approaches applies in different circumstances? Why or why not? What changes
to the criteria would you recommend and why?

The proposed revision approaches
22. Paragraph 9 of the Methodology ED proposes five Revision Approaches to enhance
the international applicability of metrics in non-climate-related SASB Standards.
In this section, we comment on the Revision Approaches.
Revision Approach 4
The criteria for deleting metrics
23. Revision Approach 4 would remove disclosure metrics when they are ill-adapted forinternational application or have no identified international equivalents outside
specific jurisdictions without leaving the disclosure topic incomplete. (Paragraphs9(d) and A6 of the Methodology ED)
24. We are of the view that metrics should be developed to meet the disclosure objectives,
and that whether or not a specific metric should be removed should be based on the

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Appendix
usefulness of that metric. That is, if metrics are not necessary to preserve theintegrity of the disclosure topics, or if metrics can be replaced by other metrics, such
metrics should not be required. Accordingly, we believe that such metrics should
be removed, and it should be considered before considering Revision Approach 1.
Metrics required only in specific jurisdictions
25. Revision Approach 4 would remove disclosure metrics when disclosure metrics haveno identified international equivalents outside specific jurisdictions. (Paragraph 9(d)of the Methodology ED)
26. We believe that a metric can be useful even if it is used in a specific jurisdiction ifsuch metric provides information about the activities of an entity in that jurisdiction.
27. One difference between Revision Approach 3 and Revision Approach 4 is that theformer refers to multiple jurisdictions, whereas the latter refers to a single jurisdiction.
The usefulness of metrics should be assessed in terms of whether they provide useful
information to understand the entity. Accordingly, whether the metric is used in
one or more jurisdictions should not be used as the criterion to decide whether ametric should be removed.
Revision Approach 5
28. Revision Approach 5 would remove and replace jurisdiction-specific metrics when arelevant replacement can be identified to preserve the disclosure topic’s integrity.
(paragraph 9(e) of the Methodology ED) Our understanding is that this may resultin adding new metrics to the SASB Standards.
29. However, our understanding is that the SASB Standards will be replaced in the future
by industry-based disclosure requirements within the IFRS Sustainability DisclosureStandards. Accordingly, we are of the view that new metrics should not be
introduced in haste as part of this project but should be discussed in future projects
to develop industry-based disclosure requirements within the IFRS Sustainability
Disclosure Standards.
30. We think Revision Approach 5 has a different timeframe from the other Revision
Approaches proposed in the Methodology ED and, therefore, should not be includedin the Revision Approaches considered in this project.

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Appendix
Relationship among Revision Approaches 1, 2 and 3
31. We are of the view that the Revision Approaches 1, 2 and 3 have the following
advantages and disadvantages with trade-offs:
APR
1

2

Advantages

Disadvantages

International comparability will
be enhanced because themetrics will be calculated using
the same standards, definitions
or calculation methods acrossjurisdictions.



The usefulness of theinformation may be reduced
when applied to metrics that are
relevant to specificjurisdictions2.

Internationally applicablereferences can be relatively
easy to use in many
jurisdictions.



Entities operating in multiple
jurisdictions can portray thewhole entity, rather than aportion of the entity that is
related to a specific jurisdiction,
because the metric can beprovided for the whole entity.

International comparability will
be enhanced, although there
may be limitations compared to
Revision Approach 1.



The same term may havedifferent definitions in different
jurisdictions3, which may cause
confusion.

Entities operating in multiple

jurisdictions can portray thewhole entity, rather than aportion of the entity that is
related to a specific jurisdiction,
because the metric can beprovided for the whole entity.

The usefulness of theinformation may be reduced
when applied to metrics thatare relevant to specificjurisdictions (see footnote 2 fordetails).

For example, applying Revision Approach 1 or Revision Approach 2 to metrics associatedwith a particular regime in a particular jurisdiction may not provide sufficient information aboutcompliance with that regime. In such cases, it may be more appropriate to apply Revision
Approach 3.
3
For example, stakeholders in our jurisdictions note that when entities in the industry ‘Electric
Utilities & Power Generators’ report their system average interruption duration (IF-EU-550a.2),
2

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Appendix
APR
3

Advantages
Disadvantages

Metrics that are relevant tospecific jurisdictions will be
disclosed (see footnote 2 fordetails).



There is no risk of confusion
because entities operating in
multiple jurisdictions are
expected to calculate anddisclose the metrics for eachjurisdiction by reference to theapplicable standards, definitions
or calculation methods in eachjurisdiction.

Comparability can be achieved
for metrics within eachjurisdiction.

International comparability is
unlikely to be achieved.



Entities operating in multiple
jurisdictions cannot portray thewhole entity because each
metric applies to a portion of
the entity that is related to
specific jurisdiction.

32. The Methodology ED proposes to apply these Revision Approaches in descendingorder of preference. However, we think the ordering may differ depending on thespecific circumstances and that it may be necessary to adopt a combination of the
Revision Approaches. For example, the ISSB may provide generalised referencesby applying Revision Approach 2, and additionally provide generalised jurisdictionalreferences by applying Revision Approach 3, in order to illustrate examples of
specific relevant references in specific jurisdictions. Accordingly, we believe that
it is appropriate for the ISSB to allow flexibility in applying these Revision
Approaches.
33. We suggest that the ISSB enhance the international applicability of the SASB
Standards in terms of whether they provide useful information to users byconsidering the relationship among Revision Approaches 1, 2 and 3, as we describein paragraph 31 of this letter and using Approaches 1-3 separately or in combination
as appropriate to the specific circumstances.

international comparability may be impaired due to the fact that the definition of ‘interruption
duration’ is different in each jurisdiction.
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Appendix
Question 4— SASB Standards Taxonomy Update objective
This Exposure Draft describes the proposed approach to updating the SASB Standards
Taxonomy to reflect amendments to the SASB Standards.
(a)

Do you agree with the proposed methodology to update the SASB Standards
Taxonomy to reflect changes to the SASB Standards? Why or why not? If you
do not agree, what alternative approach would you recommend and why?

The SASB Standards Taxonomy
34. We have no specific comments on this issue.

Question 5—Future SASB Standards refinements
This Exposure Draft focuses specifically on the first phase of narrow-scope work to
amend the SASB Standards metrics in accordance with the proposed methodology toenhance their international applicability when they contain jurisdiction-specificreferences. In subsequent phases, the ISSB will consider further enhancements to the
SASB Standards to improve their decision-usefulness, balance their cost-effectivenessfor preparers and ensure their international relevance.
(a)What other methods, considerations or specific amendments would be useful
to guide the ISSB's future work of refining the SASB Standards to support theapplication IFRS S1? Why would they be useful?

(b)

Do you have any specific comments or suggestions for the ISSB to consider inplanning future enhancements to the SASB Standards?

Developing industry-based disclosure requirements
35. We believe 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 undertake

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Appendix
the 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
36. 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
believe it is critical that the disclosure metrics are derived from specific disclosure
objectives that are accepted globally.
International applicability of the industry classification
37. 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.
38. The Methodology ED does not include the ISSB’s process for reviewing the SASB’s
Sustainable Industry Classification System® (SICS®). However, we are of the viewthat the following issues regarding the SICS® need to be addressed:(a) Some entities have noted that they use the SICS® when disclosing metrics basedon the SASB Standards because it is the only industry classification that iscurrently available to disclose metrics of sustainability-related financial
information. 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 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®. For example, there
are many service industries other than those prescribed within the SICS®

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Appendix(Advertising & Marketing, Casinos & Gaming, Education, Hotels & Lodging,
Leisure Facilities, Media & Entertainment, and Professional & Commercial
Services). However, it is not clear whether this means that other service
industries do not have any industry-based sustainability-related risks andopportunities to be identified under the SASB Standard or that they do not need
to be considered. Additional guidance on how entities should determine theindustry it belongs to within the SICS® should be provided.
(c) In Europe, EFRAG is in the process of developing a European industrial
classification system (NACE) to require sector-based disclosures, and EFRAG
is considering the possibility of providing mapping guidance between NACE
and the SICS®. Given that the major sustainability disclosure standards
requiring industry-based disclosures, at least for the time being, are likely to be
the IFRS Sustainability Disclosure Standards and the ESRS, we are concernedthat it would be onerous to entities applying these standards if the industry
classifications between these standards are different. Interoperability of theindustry classification also needs to be considered to reduce the burden on
preparers.
39. 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.
40. 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 in paragraphs
35 through 39 of this letter, which would require significant time and resources.
Accordingly, we suggest the ISSB determine the priority of this project within theoverall activities of the ISSB.

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Appendix
41. Our comments on this point will be submitted separately in the comment letter on the
ISSB’s Request for Information 2023 (ISSB/RFI/2023/1) Consultation on Agenda
Priorities, and we expect that they will be read together with our comments in thisletter.

[End of Document]

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