The Sustainability Standards Board of Japan (SSBJ) develops Sustainability Disclosure Standards in accordance with the “Rules on the Due Process for the Development of Sustainability Disclosure Standards” (hereinafter referred to as the “Due Process Rules”) set out by the Financial Accounting Standards Foundation (FASF).
The types of Sustainability Disclosure Standards issued by the SSBJ after following the Due Process Rules can be classified as follows:
(1) | Universal Sustainability Disclosure Standards | Explanation of the overall structure of Sustainability Disclosure Standards and basic rules underlying the Sustainability Disclosure Standards |
(2) | Theme-based Sustainability Disclosure Standards | Standards that prescribe sustainability-related general disclosures and theme-based disclosures |
(3) | Industry-based Sustainability Disclosure Standards | Standards that prescribe sustainability-related industry-based disclosures |
(4) | Practical Sustainability Disclosure Standards | Standards that prescribe certain disclosures that cannot be classified in (1)-(3) above |
The SSBJ is generally required to hold Board meetings every month. The discussions of the Board meetings are generally required to be open to the public unless, under limited circumstances, the Chair of the SSBJ decides to hold the meeting privately. The video recordings of the Board meetings are made available for a certain period of time on the SSBJ website (link) . Furthermore, papers used for discussions at the Board meetings are generally made available on the SSBJ website unless they relate to drafts of Exposure Drafts and final Sustainability Disclosure Standards.
Sustainability Disclosure Standards, Exposure Drafts, and Discussion Papers are issued when three fifths (3/5) or more of existing Board members vote in favor. When issuing a Sustainability Disclosure Standard, the names of the Board members voting for and against will be written in that Sustainability Disclosure Standard. If a Board member votes against issuing a Sustainability Disclosure Standard, the reasons for voting against will be written in the Sustainability Disclosure Standard.
During the deliberations, Board members may be asked for their leanings to reach a tentative decision on a specific item. The SSBJ reaches a tentative decision when three fifths (3/5) or more Board members attending the Board meeting vote in favor.
When developing Sustainability Disclosure Standards, the SSBJ is required to solicit the views of constituents in a sufficient and appropriate manner.
When developing new Sustainability Disclosure Standards or amending existing Sustainability Disclosure Standards, the SSBJ is generally required to issue an Exposure Draft and solicit comments from the general public. However, in rare cases such as when the proposal is immaterial, the Chair of the SSBJ may decide to ask the SSBJ to vote for not issuing an Exposure Draft. Furthermore, when considered necessary, the SSBJ may issue a Discussion Paper prior to the issuance of an Exposure Draft and solicit the views of constituents.
Exposure Drafts and Discussion Papers are generally required to be exposed with a comment period of two months or longer. However, considering the significance or urgency of the proposals, the SSBJ may vote to have a shorter comment period.
Responses received on Exposure Drafts and Discussion Papers, together with the name of the respondents, will be made available on the SSBJ website. Responses received are considered by the SSBJ in a timely manner and the results of the SSBJ’s considerations will be made available on the SSBJ website.
Before a Sustainability Disclosure Standard is issued, the SSBJ is required to consider whether there is a need to re-expose its proposals.
When the SSBJ issues a new Sustainability Disclosure Standard or amends an existing Sustainability Disclosure Standard that is considered material, the SSBJ is required to conduct a post-implementation review with the objective of assessing the effects of the new Sustainability Disclosure Standard on sustainability-related financial information investors, preparers, and auditors. A post-implementation review is generally required to be conducted two years after the new Sustainability Disclosure Standard become effective.
As a result of the post-implementation review, the SSBJ may decide to amend the Sustainability Disclosure Standard that is subject to review. The procedures to be followed in such case are the same as those that are required to be followed when the SSBJ develops a new Sustainability Disclosures Standard or amends an existing Sustainability Disclosure Standard.
The Due Process Oversight Committee, set up by the FASF, ensures that the due process that the SSBJ must follow when developing Sustainability Disclosure Standards is indeed followed.
The SSBJ is required to report to the Due Process Oversight Committee its compliance with the Due Process Rules whenever the SSBJ issues a new Sustainability Disclosure Standard or amends an existing Sustainability Disclosure Standard that is considered material, or whenever the SSBJ plans or conducts a post-implementation review. Furthermore, the SSBJ is required to report annually to the Due Process Oversight Committee a summary of how it has complied with the Due Process Rules for the specific year.