#Sustainability #Japan #Managed Services #Chiyoda #EY Japan

EY Japan Launches Managed Services for Sustainability Reporting

In March 2023, EY Japan, led by CEO Masateru Kitada, announced the introduction of managed services specifically designed for companies engaging in sustainability reporting. This initiative aims to ease the burden of reporting processes while enhancing the quality of disclosures. By standardizing and automating the entire process—from data collection and processing to reporting, validation, and analysis—EY Japan aims to help businesses efficiently align their sustainability information with financial disclosures.

As the global landscape shifts toward mandatory sustainability disclosures, Japan is also taking significant steps. Starting from the fiscal year ending in March 2027, companies must adhere to the disclosure standards set by the Sustainability Standards Board of Japan (SSBJ). Sustainability information plays a crucial role in how investors evaluate a company’s medium to long-term value, but collecting and managing the necessary data poses a challenge for many businesses. This is particularly pressing when it comes to compliance with SSBJ and the European Corporate Sustainability Reporting Directive (CSRD).

The sources for sustainability information often extend across various departments within a company, including environmental, general affairs, human resources, procurement, and even subsidiaries or investments along the supply chain. The SSBJ standards require listed companies to disclose non-financial information that aligns with their financial data— at the same time and within the same reporting periods. Many companies now face the urgent need to expedite non-financial disclosures by several months and must undertake significant process changes to improve the speed and quality of reporting, while ensuring third-party assurances.

The newly introduced managed services from EY Japan bring together expertise in sustainability and technology to manage the entirety of the disclosure process. As a pilot study along with SSBJ and CSRD compliance, EY Japan will establish data collection and management processes that adhere to these new standards. This includes simultaneous disclosure of financial and sustainability information, contributing to the enhancement of internal controls, standardization of third-party assurance processes, and improved traceability through document management.

By leveraging the expertise of teams within EY and utilizing digital tools and ESG data management systems from various alliance partners, the initiative aims to push forward the standardization and automation of processes, enhancing efficiency. The global delivery services offered by EY will also optimize human resources, thereby reducing service costs for businesses.

The application of AI and digital tools will support various areas such as gap analysis between disclosure standards, information gathering for benchmarking against competitors, and data collection for disclosure creation. For instance, AI will handle about 25% of tasks traditionally carried out by EY experts during gap analysis, allowing these experts to focus on more complex analyses. The outputs generated by AI will be rigorously validated by EY’s sustainability and technology specialists to mitigate issues related to explainability, fairness, bias, and hallucination—scientifically inaccurate information that is convincingly fabricated.

EY Japan envisions sustainability reporting not merely as regulatory compliance but as an opportunity for enhancing corporate value and long-term growth. By introducing this new managed service, EY aims to offer comprehensive support for companies in their sustainability reporting efforts while contributing to an increase in quality and sophistication in disclosures.

Special Features of EY’s Sustainability Managed Services

1. Deep Expertise and Proven Track Record in Sustainability
- Rapid disclosures that align with both financial and non-financial reporting timelines. Leveraging abundant experience in sustainability, the managed services will streamline processes such as data collection, processing, validation, reporting, and analysis to provide concurrent disclosures in financial reports.

2. Advanced Knowledge and Expertise in AI and Digital Technology
- Collaboration between EY’s technology experts and sustainability specialists to develop proprietary AI and digital tools that ensure the outputs are dependable and secure, minimizing significant concerns like bias and hallucination.

3. Optimization of Outcomes and Cost Efficiency
- By alleviating operational burdens and efficiently managing costs, EY’s systematic approach to standardizing the processes will ensure high-quality sustainability disclosures while utilizing global delivery services at optimum costs.

Commentary from EY Leaders

• - Keiichi Ushijima, Partner and Leader of Japan Climate Change and Sustainability Services:

“Meeting the SSBJ standards heightens the demand for speed, quality, and a structure that allows for third-party assurance. The managed services we provide will improve clients' disclosure efficiencies while also enhancing corporate value through sustainability reporting.”

• - Kazuto Kita, Financial Advisory Leader at EY Japan:

“Corporate leadership recognizes that sustainability reporting is not just a regulatory matter, but also a crucial means for dialogue with investors and enhancement of corporate value. This managed service supports prompt and high-quality sustainability disclosures, thereby fostering trust with stakeholders.”

• - Hajime Kobayashi, Partner at EY Strategy and Consulting:

“Ensuring that sustainability disclosures—including AI outputs—can be easily verified is vital. Our service integrates advanced AI capabilities with rigorous expert validation to ensure reliability in disclosures.”

About EY

EY is dedicated to creating new value for clients, members, society, and the planet while establishing trust in the capital markets. Utilizing data, AI, and advanced technologies, EY teams help clients shape their futures with confidence, addressing urgent challenges that arise today and in the future.

About EY ShinNihon LLC

EY ShinNihon LLC, EY’s member firm in Japan, focuses on audit and assurance services while also providing advisory services. For more information, please visit ey.com/ja_jp/about-us/ey-shinnihon-llc.