In Turbulent Times, Slow and Steady Wins the Race: ISSB, SSBJ, CSRD, and US ESG Regulations

---

---

As promised, Japan has published their ISSB-aligned ESG reporting standards, the SSBJ standards. As a substitute for TCFD reporting, Prime listed companies will be required to issue SSBJ reports starting from 2028 for the highest market cap tier. Nothing about the standards is shocking or extremely challenging, as one can expect from Japanese regulations. Just four months ago the lack of ambition in this standard’s release would have been a cause for disappointment, but in this era of shifting political and regulatory tides, the steady consistency of Japan’s regulations provide a beacon of hope that in calmer waters, progress towards a sustainable future prevails.

Japan’s Localized Reporting Requirements, SSBJ

This year has brought dramatic, rapid shocks to the global socio-political and economic landscapes and it is only April. Amid such turmoil, the steady consistency of Japanese bureaucracy can be a comfort to corporations looking for a haven in the storm. Within that haven, ESG reporting continues on a steady, if a bit slow, track of progress.

In March, the Sustainability Standards Board of Japan (SSBJ) released their long-anticipated sustainability reporting standards. The standards are only available in Japanese with some summary documentation in English, so we will give a brief overview of the contents.
Based on the ISSB standards, the SSBJ have worked to ensure the reporting requirements are aligned to Japanese business practices and Japanese regulatory expectations. In many cases, these changes are superficial – ex adjusting the disclosure timeline to align with Japanese disclosure – however the inclusion of third party assurance requirements is an important difference reporting corporations must take note of.

 As the ISSB standards upon which SSBJ’s are based were heavily inspired by the TCFD standards, much of the general reporting structure is maintained. The single materiality (link to article on double materiality) reporting requirement narrows the scope of required reporting to only the company’s projected financial impact from environmental change. Maintaining a single materiality basis limits the ambition of the standards and fails to put the full impact of environmental change on the table for stakeholders, but it is much easier for companies to report to with existing systems. This process of gradual, well telegraphed change is hallmark of the Japanese regulatory modus operandi. Japanese regulatory shifts rarely spark the rapid innovation and implementation needed to mitigate and address climate change and other points of environmental degradation. But they are also unlikely to spark intense backlash against the idea of creating a transparent and resilient corporate society as has been seen in many major markets around the world.

ESG around the World: Now, in Context

The early 2020’s saw the vindication of years of researcher and activist efforts as finally global markets shifted to embrace ESG as a viable and even vital corporate performance indicator. The rise of value investors saw an increase in demand for fund transparency over ESG criteria. Once institutional investors step into a space, it is a matter of time before regulations follow.

Investors scoured for information on the environmental, social and/or governance qualities of their portfolio companies, often relying on reports prepared in accordance with voluntary reporting standards such as GRI and TCFD. But voluntary reporting initiatives proved fragmented and questionably robust. Interoperability between different standards was low and gathering a universal narrative difficult. Corporations and investors alike began to attract criticism from stakeholders all the way down to the general populace for incomplete or inaccurate ESG claims. In response, many of the main reporting standards consolidated under the ISSB.

Naturally, government bodies began to take notice of the investing shift and the controversies surrounding misrepresentation of ESG performance. Around the world, bureaucrats bent their heads to the task of developing robust, ambitious ESG reporting standards tailored to their markets, with the caveat that companies would need to actually be able to meet these standards.

After five years, the largest economies and the ISSB have released their reporting frameworks. Table 1, below, provides a high level overview of how the contents of these frameworks compare against each other. Development of the standards does not constitute implementation, however, and the past year has brought many revisions to the actual reporting requirements and timelines companies will face in each jurisdiction.

Europe

The EU moved first and furthest. Under the EU Green Deal approved in 2020, their Green Taxonomy set clear guardrails for what does and does not constitute a “Green” or environmentally friendly project. Allowing, in turn, specific reporting on the amount and extent of “green” investment from a company.

They followed this relative success with a barrage of reporting and regulatory measures to force companies into compliance. The result? An alphabet soup of initiatives companies operating in the European space need to know and potentially comply with. The highlights of these being: CSRD (Corporate Sustainability Reporting Directive), CSDDD (Corporate Social Due Diligence Directive), ETS (Emissions Trading Scheme), and CBAM (Carbon Border Adjustment Mechanism). Extensive articles could, and have, be written about each of these, but broadly, issuing companies now face an overwhelming burden of compliance that comes with mandatory disclosure to so many new standards.

The challenge comes from the combination of speed and intensity for these regulations. Each of them require substantial data governance over areas for which their have been little to know monitoring previously. The data that does exist is often incomplete or questionable. Setting up data collection processes for the large corporations that are the initial reporters is time and labor intensive.

In response to the collective outcry of European companies struggling under the compliance burden, the European Union has proposed a consolidated and revised single reporting package: EU Omnibus.

The EU Omnibus would combine CSRD, CBAM, and CSRDDD regulations into one package while at the same time reducing the scope and intensity of many parts. While double materiality would still be maintained, transition plan development and implementation requirements companies and products contained in the scope, and relaxing of strict taxonomy requirements would result in a significantly less stringent reporting requirement.

Of all the proposed changes, only one has been adopted so far: the “Stop the Clock” amendment. This amendment delays the required reporting years by 2 years for each tier of reporter, excepting those in the first tier who have already begun reporting.

Companies that have been rushing to develop data collection and management programs in time for their initial disclosures are now free to relax the speed at which they have been preparing. Those preparing for later disclosures such as CSRDDD are in limbo as they wait to hear what the final regulation will be.

Reporting for reporting’s sake does not lead to sustainable transformation. It does not generate an environmentally positive economy. Effective actions taken to stop and recover from environmental degradation does. Reporting may push and encourage such actions, but in the end most corporations will end up spending their budgets on ensuring compliance rather than on achieving impact.

From such a perspective, the EU Omnibus is not a bad change. While it is more relaxed, it gives companies a guidepost to follow. And, more than anything, it does not end at the EU’s borders. All who do significant business in the EU are subject to compliance.

It is, however, a significant morale defeat to see the EU Green Deal package stripped down. The EU established itself early on as a pivotal leader in green governance. Seeing them back down from stringent ESG disclosure at the same time other regions like the USA are capitulating to anti-ESG backlash weakens the global momentum towards a sustainable, environmentally positive economy.

USA

The United States of America moved last, and with the least lasting impact. Already a fast and loose market due to heavy reliance on voluntary reporting, the SEC reporting regulation intended to provide some minimum level of transparency and consistency, the Climate Rule, was almost immediately suspended pending legislation in court over its constitutionality. As of March 2025, the SEC has voted to cease all defense of the reporting mandate, effectively killing it in the water.

The vote was issued after a sweeping political change amplified the burgeoning anti-ESG movement. In line with this movement, 22 states have issued local legislation that actively impedes or even penalizes corporate disclosure of ESG related information. Without an overriding federal legislation in place, the authority reverts back to the states. So while some states, such as California, are issuing legislation mandating reporting in line with or more stringent than the SEC Climate Rule, others are actively opposing and ESG reporting at all. This creates a complicated, highly fragmented landscape within which corporations must balance their reporting responsibilities against different compliance mandates.

Adding to the confusion for international companies operating in the US are the recent tariff changes. A highly dynamic situation, there is potential that it will lead to a circumvention of the US market at large.

International

Atwix the EU and the USA, the International Sustainability Standards Board (ISSB) released their universal standards in 2023. Neither the fastest, nor the most ambitious, yet decidedly supporting comparable ESG disclosures, the standards are a region-agnostic voluntary middle ground.

The ISSB standards are intentionally designed to ride the line between ambitious enough to be useful and palatable enough to be adopted. They provide a way for companies regardless of region to generate disclosures that are easy for stakeholders to quickly digest due to their uniform structure. The single materiality design lowers the barrier to adoption for companies that wish to focus only on their material risk from environmental degradation, rather than their role in contributing to it.

Japan

Japan’s newly announced SSBJ standards attempt to provide a slight intensification of the general ISSB standards, but not a challenge to the level demanded by CSRD reporting. To be considered aligned worth SSBJ reporting standards, companies are required to receive third party validation of their emissions footprint. In general, an SSBJ aligned disclosure will constitute an equally valid ISSB report, though companies interested in using both standards should carefully assess the cosmetic and influential differences between the two to ensure full ISSB alignment. Companies required to report to CSRD as well as SSBJ standards will need to prepare significantly more for CSRD compliance, then reframe the prepared data points to disclose to CSRD.

The SSBJ standards contents are not shocking. There were no sudden extreme change from the draft proposals issued for comment.\ They follow the general ISSB template as the Japanese government has been indicating they would since the ISSB announced they would succeed TCFD. They do not contain everything sustainably actors would ask for, most notably double materiality assessments. But they do contain what is needed in the ESG space at the moment – consistent progress.

In a time of shifting viewpoints and extreme volatility in market trends, consistency is key. Consistency generates the confidence required to stimulate investment in the new projects and sustainable finance instruments required to achieve real effect. Not just for the risk tolerant first movers, but also for the slow to change heavy industries emitters in steel, concrete, and other hard-to-abate industries.

Table 2. Provides an overview of the reporting standards relevant in the four regions described.

Disclosure Framework	SSBJ Standards	ISSB Standards (IFRS S1, S2)	The Climate Rule	SB253: CCDAA, SB261: CFRA	CSRD
Region	Japan	International	USA	California, USA	EU
Mandate Level	Mandatory	Voluntary	Mandatory	Mandatory	Mandatory
Issuing Entity	FASF/SSBJ	ISSB / IFRC / IASB	SEC	California Senate	ESRS
Full Name	Sustainability Standards Board Japan Standards	International Sustainability Standards Board	The Enhancement and Standardization of Climate-Related Disclosures	SB 253: Climate Corporate Data Accountability Act, SB 261: Climate-related Financial Risk Act	Corporate Sustainability Reporting Disclosure
Declaration Date	2025	2023	2024	2023	2023
Scheduled Initial Implementation	2027	Voluntary, though individual regions and countries are considering or have already begun mandating aligned reporting	2025	2026	2024 data reported in 2025 for first wave, with increasing inclusions every year through 2028
Current Implementation Timeline	2027	Voluntary	N/A	2026	2028 (2027 data) and 2029 (2028 data) for the second and third waves, respectively, that have not already begun reporting
Changes since declaration	No changes as of yet	No changes as of yet	2024 – Suspended due to court litigation, 2025 – court defense dropped, not expected to be fully implemented	No changes as of yet	“Omnibus” package revisions simplifying disclosure requirements proposed, “Stop the Clock” proposal adopted to delay reporting requirement

---

Table 2: Summary Table of Major Regional Reporting Frameworks

Japan’s Advantage: Steady Progress towards Transformation

As the saga of reporting regulations shows, the transition to an environmentally positive economy is a work in progress. Paving a new path brings the possibility of getting lost along the way, backtracking, and having to start anew.

We know that we need immediate, effective action to halt and ideally reverse environmental degradation. But in implementation, when action is plagued by confusion and inconsistencies it is neither effective nor immediate. Rather than risking volatile backlash, the Japanese approach of giving clear, well telegraphed guidance without overly strict barriers to entry may result in a more wholistic transition. One in which both first movers and heavy emitters alike move together to achieve a sustainable economic transformation.

It is not perfect. The newly released, rather underwhelming Energy Plan demonstrates that. But at least from a corporate standpoint there is less regulatory volatility.

Sometimes, it’s any port in a storm.

Sometimes, slow and steady wins the race. I just wish we had started the race 20 years ago.

---

Sources and Additional Information

• California SB 253 and SB 261: What Businesses Need to Know – Persefoni
• SEC Final Rule on climate-related disclosures: What is required and what to do now – GrantThornton
• Executive Summary of the SEC’s Landmark Climate Disclosure Rule – Deloitte
• SEC Adopts Rules to Enhance and Standardize Climate-Related Disclosures for Investors – U.S. Securities and Exchange Commission
• Sustainability-related risks and opportunities and the disclosure of material information – IFRS
• About SSBJ Standards – SSBJ Official Website
• Live Anti-ESG State Action Tracker – Pleiades Strategy
• 事務局説明資料 – FSA (Japanese Only)
• サステナビリティ開示ユニバーサル基準 ~ サステナビリティ開示基準の適用~ – SSBJ (Japanese only)
• サステナビリティ開示ユニバーサル基準「サステナビリティ開示基準の適用」、サステナビリティ開示テーマ別基準第 1 号「一般開示基準」及びサステナビリティ開示テーマ別基準第 2 号「気候関連開示基準」の公表 – SSBJ (Japanese only)

Edits and Revisions

23.05.2025 – The SSBJ reporting years timeline was revised following confirmation of the reporting requirements.