Brazil’s Securities and Exchange Commission (CVM) has revised its sustainability reporting regulations, replacing mandatory climate and sustainability disclosure requirements with a voluntary “comply-or-explain” framework for publicly listed companies.
- Brazil Moves Away from Mandatory Sustainability Reporting
- New “Comply-or-Explain” Model Introduced
- ISSB Standards Remain the Preferred Reporting Framework
- Balancing Transparency and Corporate Flexibility
- Implications for ESG Reporting in Brazil
- Growing Influence of ISSB Standards Worldwide
- A New Phase for Sustainability Reporting in Brazil
The move marks a significant shift in Brazil’s ESG reporting landscape and comes ahead of the previously planned mandatory sustainability reporting requirements that were scheduled to take effect for fiscal year 2026 data.
While sustainability disclosures will no longer be compulsory, companies that choose not to report will be required to publicly explain their decision, maintaining a degree of transparency for investors and market participants.
Brazil Moves Away from Mandatory Sustainability Reporting
The Brazilian Securities and Exchange Commission originally introduced sustainability reporting requirements in 2023 as part of efforts to align the country’s capital markets with international ESG disclosure standards.
Under the initial framework, public companies were expected to begin mandatory sustainability and climate-related reporting for fiscal years starting on or after January 1, 2026.
The reporting requirements were based on sustainability disclosure standards issued by the Brazilian Sustainability Pronouncements Committee, which adopted the framework developed by the International Sustainability Standards Board under the IFRS Foundation.
These standards included:
- IFRS S1 – General Sustainability-Related Financial Disclosures
- IFRS S2 – Climate-Related Disclosures
The revised regulation now removes the mandatory reporting obligation while retaining ISSB-based standards as the preferred framework for companies that choose to publish sustainability reports.
New “Comply-or-Explain” Model Introduced
Under the updated regulation, publicly listed companies can decide whether to publish sustainability and climate-related disclosures.
However, organizations that opt not to issue sustainability reports must publicly communicate their decision through a formal market announcement.
The disclosure must include a clear explanation of the reasons behind the decision and must be submitted at the same time the company files its annual financial statements in 2027.
The approach creates a “comply-or-explain” reporting model, a regulatory mechanism commonly used in corporate governance and ESG frameworks worldwide.
The objective is to provide companies with greater flexibility while ensuring investors continue to receive transparency regarding sustainability reporting decisions.
ISSB Standards Remain the Preferred Reporting Framework
Although reporting has become voluntary, companies that elect to publish sustainability disclosures must continue to follow the standards established by CBPS and aligned with ISSB requirements.
The regulation preserves consistency, comparability, and credibility for sustainability information disclosed to investors.
For companies that choose to report, the updated framework includes several important requirements:
- Sustainability reports must comply with CBPS and ISSB standards.
- Companies must continue reporting for at least three consecutive years once they begin.
- Organizations that later decide to discontinue reporting must announce their intention through a market disclosure during the fiscal year preceding their exit from the reporting program.
These measures are designed to prevent inconsistent reporting practices and maintain confidence in sustainability-related disclosures.
Balancing Transparency and Corporate Flexibility
The CVM stated that the revised approach seeks to balance investor transparency with corporate decision-making flexibility.
According to the regulator, the updated framework preserves the benefits of standardized sustainability reporting while allowing companies to evaluate the costs and benefits associated with preparing ESG disclosures.
The commission emphasized that businesses should retain the freedom to determine how shareholder resources are allocated while still providing sufficient information to investors regarding sustainability reporting choices.
Implications for ESG Reporting in Brazil
The decision comes at a time when sustainability disclosure regulations are evolving globally.
Many jurisdictions, including the European Union, United Kingdom, Australia, Singapore, and several Asian markets, are advancing mandatory climate and sustainability reporting requirements based on ISSB standards.
Brazil’s revised approach represents a more flexible pathway, allowing market participants to gradually adopt sustainability reporting while maintaining alignment with international reporting frameworks.
Industry observers note that investor expectations, lender requirements, and global supply chain pressures may continue to encourage companies to publish sustainability reports even in the absence of a legal mandate.
Growing Influence of ISSB Standards Worldwide
The ISSB framework has rapidly emerged as the global benchmark for sustainability and climate-related financial disclosures.
Developed by the IFRS Foundation, the standards aim to create a consistent and comparable reporting framework that helps investors assess sustainability-related risks and opportunities.
As more countries integrate ISSB standards into national regulatory systems, companies increasingly view sustainability reporting as a strategic business requirement rather than solely a compliance exercise.
Brazil’s decision to maintain ISSB-aligned reporting standards while introducing a voluntary adoption model reflects the growing influence of these global ESG disclosure frameworks.
A New Phase for Sustainability Reporting in Brazil
The revised regulation signals a new chapter for sustainability reporting in Brazil’s capital markets.
While mandatory disclosure requirements have been withdrawn, the introduction of a comply-or-explain framework ensures that transparency remains a central element of the reporting process.
For investors, regulators, and businesses, the updated rules offer a balance between flexibility and accountability as Brazil continues to align its sustainability reporting ecosystem with global ESG standards and evolving market expectations.
