ESG Reporting Now Mandatory in Brazil

The Brazilian landscape regarding the ESG (Environmental, Social, and Corporate Governance) agenda, which focuses on managing environmental, social, and governance impacts and risks, is constantly evolving.

When it comes to regulation and normative treatment of this agenda, there has been a significant increase in the publication of ESG rules and standards guiding the sustainable conduct of business and investment across companies and economic sectors in Brazil.

Signs of this progress are evident in the recent publication of Resolution No. 193, dated October 20, 2023, by the Brazilian Securities and Exchange Commission (CVM), and Resolution No. 1,710, dated October 25, 2023, by the Federal Accounting Council (CFC)2, which establish standards for the publication of Sustainability and ESG Impact Reports to be observed by private companies in Brazil.

With the resolution approved by the CVM, effective since November 1, 2023, Brazil has aligned its open capital market regulations with global standards defined by the International Sustainability Standards Board (ISSB), an entity created under the IFRS Foundation.

This represents the first regulation worldwide to adopt the newly issued IFRS Foundation standards, IFRS S1 and IFRS S2, which respectively require corporate reports to disclose sustainability and ESG aspects and risks, including those related to climate issues.

According to the CVM resolution, from January 1, 2026, all publicly traded companies in Brazil must comply with the annual publication of corporate sustainability and ESG information reports, prepared and regulated according to the IFRS framework.

Another significant advancement in the country is Resolution No. 1,710, issued on October 25, 2023, by the Federal Accounting Council (CFC). This resolution sets disclosure standards for sustainability information in line with the IFRS Foundation’s IFRS S1 and IFRS S2 standards, also addressed by the CVM.

Under this CFC regulation, these international sustainability reporting and ESG standards are incorporated into the mandatory framework of Brazilian Accounting Standards (NBC).

First, as Brazilian Accounting Standards for Sustainability Information Disclosure (NBC TDS), and second, for Assurance of Sustainability Information Disclosure (NBC TAS), integrating advanced ESG risk and impact reporting into financial and corporate accounting frameworks in Brazil.

Similar to the CVM, the rule adopted by the CFC will be mandatory from the 2026 fiscal year, requiring adaptation and restructuring of how various companies and national economic sectors report and publish sustainability topics, ESG agenda items, and climate-related issues in their operations.

These new ESG rules complement other important sectoral regulations, such as BACEN Resolution No. 4,945/2021 and SUSEP Circular No. 666/2022, which directly impact companies and the Brazilian market as a whole.

In the Brazilian insurance sector, SUSEP Circular No. 666/2022 3 requires, from June 30, 2024 (Segment S1) and June 30, 2025 (Segments S2, S3, and S4), that all insurers and related entities publish an Annual Sustainability Report, disclosing ESG risk management actions and sustainability initiatives implemented within their structures and in the underwriting and provision of insurance services.

Unlike the CVM and CFC resolutions, which apply IFRS S1 and S2 sustainability standards, SUSEP Circular 666 does not specify a particular reporting framework for insurers. In this context, and considering recent disclosures from IFRS and the Global Reporting Initiative (GRI), insurers and other sector entities may adopt either the Integrated Report (as per the International Integrated Reporting Council – IIRC) or the Sustainability Report (following GRI standards) for their ESG reporting.

A recent study published by the Brazilian Business Council for Sustainable Development (CEBDS) indicates that 91% of Brazil’s main Sustainability and ESG Impact Reports utilize the GRI framework, either alone or combined with other reporting frameworks.

It is also worth noting that under the State-Owned Companies Law (Federal Law No. 13,303/2016), Article 8, Section IX, public companies and mixed-capital companies are legally required, as a transparency measure, to "publish an annual Integrated or Sustainability Report," clearly linked to IIRC and GRI standards, providing an important legal basis to promote the ESG agenda in the public sector.

All of these developments reaffirm the role of sustainability and ESG regulations, in light of the global "Carrots & Sticks" report, in effectively enhancing corporate and organizational accountability and transparency regarding ESG risks and impacts, serving as an instrument for public and intergenerational commitment to sustainable development.

In view of these regulatory advances, the importance of ESG strategies for both public and private companies and economic sectors in Brazil becomes increasingly evident. To prevent greenwashing and other risks, it is essential to develop and consolidate advanced corporate policies and reporting mechanisms regarding socio-environmental, climate, and governance risks.

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Adapted from the original article, published on 23/11/2023 on the Cabanellos Advocacia website and also on LinkedIn.

Author: Bruno Teixeira Peixoto