The Vital Importance of the Global ESG Reporting Standard adopted by Brazil

A Business Need and Stakeholder Demand

Companies face the constant search for the best way to publicize their activities and efforts towards sustainability, rising to the challenge of communicating your progress effectively. At the same time, os stakeholders, especially investors, face obstacles in comparing the results of these companies due to diverse ESG reporting standards (Environmental governance, social and corporate) adopted by each of them. This disparity can generate criticism and questions from the market and society, instigating the need for a global ESG reporting standard.

The Historical Landmark: Brazil and the Adoption of the Global Standard

Brazil becomes a pioneer by making the adoption of the global ESG reporting standard official. The Securities and Exchange Commission (CVM) approved, in 20 of October, mandatory reporting following the standards of IFRS S1 and S2. From 2025, the preparation and publication of reports related to ESG and Climate risk management will be voluntary, with post-public consultation adjustments and regulatory impact analysis. Posteriorly, from 2027, disclosure will become mandatory for class-listed companies 1 e 2.

Why IFRS is a Leap on the Climate and ESG Reporting Agenda?

IFRS S1 and S2 establish reporting requirements covering short-term sustainability risks and opportunities, medium and long term, especially focused on climate. This allows stakeholders to understand business risks and opportunities related to sustainability and their impacts on cash flows. Companies must consider climate aspects, socio-environmental and strategic, beyond metrics, goals and governance to deal with these topics.

Five Key Points that Define the Advancement Represented by IFRS:

1. Global Standardization: Establishes a single, comparable set of sustainability and climate indicators, facilitating global adoption by financial regulators.
2. Transparency and Governance: Emphasizes transparency in corporate governance and strategies.
3. Comparability of Indicators: Proposes indicators that can be compared between companies in the same sector and internationally.
4. Standards Integration: Incorporates standards such as SASB and TCFD recommendations, expanding the strategic approach to the management and governance of risks and opportunities.
5. Double Materiality: Considers the financial and non-financial impact on sustainability management, recognizing the financial, environmental and social relevance for organizations.

Brazil’s adoption of the global ESG reporting standard represents a significant milestone, offering a structured framework for companies to communicate their approach and performance towards sustainability. This not only simplifies comparison between organizations, but also strengthens transparency and awareness about the importance of sustainability in business, driving positive change on a global scale.

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