Brazilian companies, especially publicly traded ones, are preparing for a transition in the format for reporting their results, opportunities and risks related to sustainability. After the launch, on 26/06/2023, of the new standards for IFRS sustainability reporting, the CVM - Securities and Exchange Commission recently launched, on 20/10/2023, a resolution for companies to present this sustainability and ESG risk management information, making adherence voluntary until 2026 and after this period mandatory for publicly traded companies, funds investment and securitization companies.
The decision places Brazil at the forefront of countries that have adopted the new criteria of the International Sustainability Standards Board (ISSB) on sustainability reports by Brazilian companies.
Adherence to the measure will be voluntary until 2026, when it will become mandatory for publicly traded companies, investment funds and securitization companies. From 2027 onwards, disclosure will be mandatory and will occur three months after the fiscal year or simultaneously with the financial statements. The decision is linked to the Ecological Transformation Plan, launched this year by the Ministry of Finance. It is a complex economic and social development plan, with robust environmental preservation and technology components.
The inaugural standards established by the international council, S1 and S2, help improve confidence in companies' sustainability disclosures, with the aim of informing investment decisions. The report must follow the standardization rules of the International Sustainability Standards Board, and will need to contain information regarding opportunities and risks related to climate and sustainability. With this, for the first time it will be created a common language to disclose the effect of climate-related risks and opportunities on a company's prospects.
Understanding IFRS S1 and S2:
The International Sustainability Standards Board (ISSB) launched its first standards focused on sustainability on 26/06/2023. IFRS S1, focusing on sustainability, and IFRS S2, focused on climate factors. IFRS S1 and IFRS S2 focus on investors, shareholders and financiers, so thethey help to improve standardization, maturity and trust regarding the information disclosed by companies on topics. The standards will also contribute to the decision-making process of investors and organizations.
The objective of IFRS S1 is the obligation for a company to disclose information about its risks and opportunities related to sustainability, in a useful way users. IFRS S2 complements IFRS S1, more specifically with regard to climate risks and opportunities.
The role of IFRS S1 and S2 is considered essential in promoting global accounting standardization, financial transparency and corporate governance related to sustainability and climate. According to experts, in addition to benefiting companies by facilitating access to investments and international trade, they also bring benefits to society, enabling financial information linked to sustainability and climate to be presented in a clear and reliable way.
There are many opinions that the changes will be beneficial, but there is still a lot of concern regarding the trajectory of companies' preparation to comply with the standards. It is strongly recommended that detailed diagnoses be carried out within companies, to begin the process by understanding mainly the current level of maturity of their disclosures and how their team of experts in financial and sustainability reports is.
To access CVM Resolution 193 in full on the official website, click on the link below:
https://conteudo.cvm.gov.br/legislacao/resolucoes/resol193.html
Get in touch with TATICCA – ALLINIAL GLOBAL, which works with integrated auditing services, internal audit, accounting, tax, corporate finance, financial advisory, risk advisory, technology, business consulting and training, for more information, visit www.taticca.com.br or e-mail taticca@taticca.com.br and learn more. Our company has certified methodologies for carrying out activities.