In March 2025, the Sustainability Standards Board of Japan (SSBJ) will...Two standards for disclosing sustainability-related financial information have been published.Yes, we have established "General Disclosure Standards" and "Climate-Related Disclosure Standards," the latter of which includes disclosure of Scope 1, 2, and 3 GHG emissions.
Meanwhile, the Financial Services Agency is considering a schedule for mandatory disclosure.The policy is to gradually mandate disclosure for prime listed companies starting from the fiscal year ending March 2027.This indicates that.
In this context, companies need to proceed with calculating and disclosing Scope 3 emissions in addition to Scope 1 and 2 emissions. Scope 3, in particular, is a highly complex area in practice, due to its numerous categories and the multiple calculation method options available depending on each company's business model and level of calculation maturity.
This article introduces a phased approach to calculating Scope 3 emissions and outlines practical considerations.
Domestic trends related to Scope 3 calculations
As concerns about climate change grow, it has become clear that the impact on corporate growth cannot be ignored, and interest in information regarding companies' GHG emissions continues to increase. Institutional investors, both domestic and international, are demanding quantitative disclosure of information, including GHG emissions and reduction performance, as well as comparable quantitative data with competitors. In response to this, the Sustainability Standards Board of Japan (SSBJ) published disclosure standards in March 2025. These standards are aligned with international standards (ISSB standards) while taking into account various systems such as Japanese sustainability laws and regulations.
Climate-related disclosure standards require disclosure of Scope 1, Scope 2, and Scope 3 emissions. Here, Scope 3 refers to:Calculation GuidelinesGiven that the Ministry of the Environment has published these standards, many companies have already begun disclosing them in their sustainability reports, integrated reports, and securities reports. Meanwhile, the Financial Services Agency is considering when disclosure based on these standards will become mandatory in securities reports. It is expected that the standards will be applied to approximately 70 large companies with a market capitalization of 3 trillion yen or more from the fiscal year ending March 2027, to companies with a market capitalization of 1 trillion yen or more (approximately 180 companies) from the fiscal year ending March 2028, to companies with a market capitalization of 500 billion yen or more (approximately 300 companies) from the fiscal year ending March 2029, and finally to all companies listed on the Tokyo Stock Exchange Prime (approximately 1,600 companies) by the 2030s. In addition, in order to ensure the reliability of the disclosed information, consideration is underway to introduce an assurance system by third parties such as auditing firms and to establish an inspection and supervision system for sustainability information.
Furthermore, many companies have set reduction targets for Scope 1, 2, and 3 emissions, and it would not be an exaggeration to say that Scope 3, like Scope 1 and 2, is moving from the calculation stage to the reduction stage.
Steps for calculating Scope 3
Scope 3 emissions are indirect emissions that arise from the entire supply chain (including suppliers, consumers, and logistics) excluding Scope 1 and 2 emissions. Calculating Scope 3 emissions is complex, and it is difficult to accurately track all categories simultaneously. Therefore, many companies are updating their calculation methods through a phased approach to improve accuracy and reduce emissions.
Step 1: A basic overview
First, in order to grasp the overall picture and scale of Scope 3 emissions, it is common to limit the scope of calculation (for example, only headquarters, only major business operations, etc.) and collect and calculate data to the extent possible, taking into consideration the workload of calculating activity levels. In this step, as emission intensityDatabase provided by the Ministry of the EnvironmentThis method involves using a specific tool and collecting data corresponding to that tool's activity level. While this calculation method has the advantage of being relatively easy to use, it also has disadvantages, such as the fact that as the business grows, the transaction amount and number of employees used as activity levels naturally increase, meaning that reduction efforts may not be reflected in emission reductions. At this step, we identify important categories while considering the categories with high emissions and their impact on the business, and this serves as a starting point for gradually improving data accuracy, transitioning to calculations that allow for reductions (from step 2 onwards), and expanding the scope of data collection, focusing on those categories during activities.
Step 2: Transition to a quantity-based system
As the next step, we will replace the activity volume from transaction amount and number of employees to actual procurement quantities, transportation methods and distances, etc., and convert the emission intensity from a monetary basis toAIST-IDEAWe will change to a quantity-based approach. This will make it easier to reflect changes in suppliers and usage in emissions, bringing us closer to visualizing the effects of reductions. This calculation method still has disadvantages, such as the fact that as the business grows, the procurement quantities and travel distances used as activity levels will naturally increase, so reduction efforts will not be reflected in emission reductions, the emission intensity database is paid, and the workload will increase. However, this is an unavoidable step in order to move to the calculation method for reductions (Step 3).
Step 3: Primary data generation of emission intensity
In the final stage, the activity level remains unchanged from Step 2, but the emission intensity is changed to company-specific values (primary data), that is, the actual emission intensity for each trading partner and product/service unit. This allows reduction activities at each trading partner to be reflected in the company's Scope 3 calculation, making it possible to achieve both business growth and emissions reduction. On the other hand, cooperation from each trading partner, such as suppliers, is essential to achieve this. For this reason, many companies, including leading companies, have begun to actively engage with their suppliers (this will be explained in another column).
Points to note when calculating
The following points should be considered when implementing a phased approach:
- Setting Priorities
Expanding the scope of Scope 3 data calculations to increase coverage and changing calculation methods to reflect reduction efforts is necessary, but this will increase the workload. Therefore, it is effective to grasp the approximate scale, identify areas with high impact on your business, and prioritize addressing them. For example, if Category 1 (purchased products and services) is identified as a critical category in Step 1, you should start strengthening communication with high-impact suppliers. While it may be possible to refine other categories, it is important to determine priority categories by considering the workload involved in refinement and its impact on reduction.
- Formulation of calculation plan
The calculation methods described in Steps 2 and 3 above place a heavy workload on the calculation process, so we will gradually expand the scope and improve accuracy as much as possible. On the other hand, we cannot ignore the schedules for mandatory disclosure and customer requests for disclosure. Therefore, it is important to formulate a phased schedule. Regarding engagement with suppliers in Step 3, it is expected that we will share our reduction strategies and targets, encourage the calculation of primary data, select products and services with low environmental impact, and jointly promote emissions reduction projects.
summary
According to the standards set by SSBJ, calculation and disclosure of Scope 1, 2, and 3 emissions are required. Calculating Scope 3 emissions is not merely a matter of complying with disclosure obligations; it is a crucial foundation for balancing business operations with environmental responsibility. A phased approach, starting with simplified calculations and gradually moving towards more sophisticated methods that directly lead to emission reductions, has proven to be a realistic and effective method for many companies. Identify the areas with the highest impact on your company and evolve your methods to enable reductions, thereby contributing to increased corporate value.