The consolidation of the Value Reporting Foundation (VRF) and the Climate Standards Disclosure Board (CDSB) under the International Financial Reporting Standards (IFRS) Foundation, as well as the establishment of the International Sustainability Standards Board (ISSB) in 2021 mark a great shift in corporate sustainability disclosure. Exposure drafts of two proposed standards have already been issued, and the upcoming consolidation is only weeks away. These developments will impact sustainability disclosure greatly, and the alignment towards this shift on the corporate side will create many opportunities to advance disclosure practices.
During this time of change, we have decided to take a closer look at how disclosures in Japan align with the Sustainability Accounting Standards Board (SASB) Standards. The SASB Standards will continue to play a crucial role in corporate sustainability disclosures, as they are being embedded into the development of ISSB’s new standards. Assessing the reports of the TOPIX 100 against the current SASB Standards provides a crucial snapshot of the state of disclosure. And understanding what areas are already aligned and where there are still opportunities to improve disclosure practices can be a key piece for companies and investors in their shift towards the upcoming ISSB standards.
51 of the TOPIX 100 companies refer to the SASB Standards. They refer to the standards in their reports, in their materiality analyses or publish a SASB content index. How and to what degree the standards are applied differs by sector and industry.
The TOPIX 100 companies mention 83% of all relevant industry specific topics in their reports, and their analyses identify 71% of the industry specific topics as material issues. Not all topics need to be considered material, and developing an individual approach towards materiality under a clear methodology is a vital step towards understanding the internal and external environment. However, the commonality between disclosures and standards suggest a great degree of alignment between the two.
The TOPIX 100 companies fully disclose 9% of all accounting metrics, partially disclose 33% of metrics, and do not disclose the remaining 58%. Results greatly vary among dimensions/topics and sectors/industries. These gaps in disclosure levels can be traced to distinct attributes the metrics have. Reviewing the SASB Standards in areas where disclosure is limited can help companies further improve their current disclosures and smoothen the transition towards the upcoming disclosure standards of the ISSB.
