Why Your SHK Number Is Not Your SSBJ Scope 1 and 2

Japan’s SHK system has required specified emitters to report greenhouse gas emissions since 1 April 2006 (Ministry of the Environment). Its operator boundary and listed emission activities do not match the SSBJ reporting boundary. An SHK figure therefore cannot be copied into Scope 1 and Scope 2 without checking the method, period and entity boundary.

What SHK actually obliges

SHK binds a 特定排出者, a specified emitter, and the threshold depends on the gas.

For energy-origin carbon dioxide, the test is energy use across all of the operator’s establishments totalling 1,500 kilolitres of crude oil equivalent a year or more. For non-energy-origin carbon dioxide and the other six gases, the test is two conditions together: emissions of 3,000 tonnes of CO2 equivalent or more per gas from the listed emission activities, and 21 or more permanent employees across the operator (Ministry of the Environment).

Emissions are computed as activity data multiplied by an emission factor, and both the method and the factor are fixed by ministerial ordinance for each listed activity. Energy-origin CO2 is reported on the Energy Conservation Act periodic report form. Everything else goes on the Global Warming Act form (same source). The report goes to the competent minister for the industry, and the deadline for the fiscal 2026 reporting round was 31 July 2026 (Ministry of the Environment).

The obligation attaches to the operator, not to a consolidated group. Its emission activities are a closed list rather than all direct emissions from owned or controlled sources.

What SSBJ requires, and the door it leaves open

The SSBJ Climate Standard paragraph 49 requires emissions to be measured in accordance with the Greenhouse Gas Protocol Corporate Standard (2004). The proviso allows a different method for all or part of a company where a jurisdictional authority, or the exchange the company is listed on, requires that method (SSBJ Climate Standard).

Paragraph 50 requires a split when the amount measured by the different method is material. The disclosure shows the amount measured under the GHG Protocol (2004) and the amount measured by the different method. Paragraph 51 requires a further split when one jurisdiction’s method is material on its own (same source).

SSBJ Practical Solution No. 1

On 11 June 2026 the SSBJ issued Practical Solution No. 1, on disclosure where a company follows the Climate Standard using emissions measured and reported by the SHK method. It applies to annual reporting periods ending on or after 31 March 2027, with early application permitted and disclosed (SSBJ Practical Solution No. 1).

SHK-based direct emissions, meaning the basic emissions figure other than energy-origin CO2 from purchased electricity and heat, go into Scope 1 with no further adjustment beyond a period adjustment.

SHK-based indirect emissions, meaning energy-origin CO2 from purchased electricity and heat, go into market-based Scope 2 with no further adjustment beyond a period adjustment.

Location-based Scope 2 is computed separately, by multiplying the same indirect activity data by the average emission factor published by the Ministers of the Environment and of Economy, Trade and Industry (same source, paragraph 7).

Paragraph 8 requires the company to state whether the non-GHG-Protocol method applies to Scope 1, Scope 2 or both. Paragraph 9 requires a period adjustment where the SHK calculation period differs from the reporting period. Under paragraph 3, the Practical Solution does not apply when a company adjusts SHK figures to comply with the GHG Protocol (same source).

Why the SHK electricity figure is market-based

From the fiscal 2025 reporting round, the electricity and heat factor a specified emitter uses is the 基礎排出係数（非化石電源調整済）, the basic emission factor adjusted for non-fossil power. Unlike the old basic factor, it reflects the non-fossil certificates, green power and heat certificates, and renewable-origin J-Credits procured by the utility itself. Separately, certificates and renewable J-Credits that the reporting company retires or transfers are now reflected in its basic emissions as well, not only in the adjusted figure. The older unadjusted factor still exists, but it is used by utilities to compute their own factors and is not used by reporters at all (Ministry of the Environment, changes from the fiscal 2025 reporting round, pages 7 to 9).

The SSBJ says the same thing in its basis for conclusions. SHK-based indirect emissions go into market-based Scope 2 because the content of electricity purchase contracts and unbundled contractual instruments is reflected in them (SSBJ Practical Solution No. 1, BC23).

It also notes what SHK does not do. SHK requires reporting that corresponds to market-based Scope 2, but nothing that strictly corresponds to location-based Scope 2 (same source, BC24). The location-based figure has to be built, and the standard tells you what to build it from: the national average factors and substitute values printed in the same published lists of electricity and heat supplier factors (same source, BC25).

Why the SSBJ uses the basic figure

SHK requires both a basic emissions figure and an adjusted emissions figure. The SSBJ specifies the basic figure.

The 2024 reform of SHK introduced a direct and indirect breakdown within basic emissions, which is what makes a Scope 1 and Scope 2 split possible. The adjusted figure carries no such breakdown. The adjusted figure also contains offset items that the GHG Protocol does not recognise in Scope 2, and the 2025 reform widened them further by allowing forest carbon stock changes to be used optionally. So the basic figure is closer to the GHG Protocol measurement, and comparability pointed the same way (same source, BC19 to BC21).

A company that applies the Practical Solution to both scopes may still disclose the adjusted figure and its adjustment items as voluntary reference information (same source, BC22).

Factor vintages and revisions

Open the published factor list and read its own header. The list of per-utility factors published on 9 January 2026 is based on fiscal 2024 results, and it is the list used to calculate fiscal 2025 emissions, which are reported in fiscal 2026 (Ministry of the Environment, factor list for the fiscal 2026 submission).

The factor set also changes after publication. The fiscal 2026 submission list was updated on 25 February, 4 June, 23 July and 3 August 2026 (same source). Store the factor vintage and publication date with each number. The reporting-boundary reconciliation needs the same version control.

The reconciliation, line by line

Dimension	SHK under the Global Warming Act	SSBJ Scope 1 and 2
Who is caught	Specified emitters: 1,500 kL crude oil equivalent of energy a year, or 3,000 tCO2e per gas plus 21 employees	Prime-listed companies above the market-capitalisation tiers set by the Disclosure Ordinance
Reporting entity	The business operator, with franchise chains treated as one operator	The same reporting entity as the related financial statements
Emission sources	A closed list of emission activities fixed by ordinance	Direct emissions from owned or controlled sources, under the GHG Protocol (2004)
Scope 1 equivalent	SHK-based direct emissions, unadjusted	Scope 1
Scope 2, market-based	SHK-based indirect emissions, unadjusted	Market-based Scope 2
Scope 2, location-based	Not required as such	Indirect activity data times the average factor published by the two ministries
Electricity factor	Basic factor adjusted for non-fossil power, per utility, plus an adjusted factor	Grid average for location-based, contractual instruments for market-based
Factor vintage	Prior fiscal year’s results, revised several times after first publication	The measurement approach, inputs and assumptions have to be disclosed
Period	The Japanese fiscal year, with a period adjustment where it differs from the reporting period	The same reporting period as the financial statements
Where it goes	The competent minister, by 31 July, then aggregated and published by the state	The annual securities report, with the financial statements
Assurance	None	Limited assurance from the year after mandatory disclosure

What to do with this

Record which route the company uses. Practical Solution No. 1 applies when the company uses the SHK method under the paragraph 49 proviso. It does not apply when SHK figures are adjusted into a GHG Protocol number.

Treat the SHK electricity figure as market-based. It reflects certificates bought by the utility and certificates retired by the reporting company.

Build the location-based figure from the same activity data and the published average factors.

Check the reporting period before using the number. Record any period adjustment for a subsidiary with a different year end.

Tag each entity by method before the reporting cycle closes. When the SHK part is material, paragraph 50 requires the disclosure to show both figures. The same entity-level tagging helps with Scope 3 categories and Japan’s emissions trading rules.

The reconciliation should identify the method and reporting period behind each number. It should also record the entity boundary and factor vintage.

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