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PTThe Strategy dimension of IFRS S1 and S2
In the previous article in this series on IFRS S1 and S2 , we addressed the Governance dimension, focusing on the structures responsible for overseeing sustainability and climate change risks and opportunities. The Strategy dimension deepens this discussion by focusing on how these factors are incorporated into the business model, strategic planning, and financial decisions.
More than a technical evolution of reporting, the Strategy dimension addresses a recurring demand from investors: that current and potential impacts of sustainability risks and opportunities on companies’ present and future financial performance be disclosed and treated as a fundamental part of their fiduciary duty.
In this context, this article explores what IFRS S1 and S2 specifically require in the Strategy dimension, how these requirements are beginning to be reflected in Brazilian market practice, and how a robust strategic approach can go beyond regulatory compliance, contributing to value creation, corporate resilience, and competitive advantage.
What the Strategy dimension entails
The Strategy dimension defines how entities must explain the effects of sustainability- and climate-related risks and opportunities on corporate strategy, business model, and financial outlook. The focus is forward-looking and economic: demonstrating how these factors influence strategic decisions and value creation over time.
Across the board, the Strategy dimension acts as a link between governance, risk management, and metrics, requiring consistency between risk identification, decision-making, and monitoring . The standard requires companies to demonstrate how sustainability is incorporated into the strategic logic of the business.
From regulation to practice: how companies are structuring their strategy
The first disclosures aligned with IFRS S1 and S2 indicate that reports are beginning to shift, albeit gradually, from a descriptive exercise to a tool supporting decision-making. There is a growing effort to explain how climate and sustainability risks and opportunities influence strategic priorities such as growth, operational efficiency, and competitive positioning.
In the Brazilian market, the reports already published by Vale and Renner demonstrate the transition toward a more strategic use of sustainability information. In these cases, we observe a shift away from extensive materiality approaches in favor of more selective analyses, guided by the potential for risks and opportunities to affect strategic decisions and financial results.
Renner, for example, integrates physical and transition climate risks into its strategy for operational efficiency and sustainable expansion, translating supply chain exposures, regulatory pressures, and costs associated with emissions into decisions regarding logistics, supplier relationships, investments, and capital allocation. Similarly, Vale is now linking climate risks to issues such as asset resilience, operational continuity, and investment prioritization, signaling progress in integrating sustainability, strategy, and financial performance.
WayCarbon has been providing advisory support to companies across various sectors to prepare for reporting in 2027, and one challenge has drawn significant attention: the (lack of) integration between internal departments—sustainability, treasury, risk, operations, etc. In many cases, for example, climate analyses and risk studies are developed in isolation and parallel to formal strategic planning processes, which makes it difficult to translate the results into consistent executive decisions.
Another challenge observed relates to data reliability, especially in risk and climate scenario analyses. In the early stages of adoption, it is common to rely on assumptions, generic models, or external data that is poorly calibrated to the company’s reality. This issue takes on added significance given the need for information assurance. As the market moves toward reports subject to greater scrutiny, it becomes essential that risk and scenario studies be robust, well-documented, and supported by defensible assumptions. Preparation for assurance is not merely a technical requirement but a key factor for the credibility of strategic disclosures and for the trust of information users.
In this context, a complementary challenge arises for the ongoing application of standards: how to ensure the consistency, comparability, and traceability of these analyses over time when initial assumptions and estimates need to be revised, refined, or even replaced in future reporting cycles?
Going beyond regulatory compliance
As companies advance in regulatory alignment for a more consistent application of IFRS S1 and S2, it becomes evident that reporting can serve as a driver of value creation, not merely a regulatory response. When sustainability risks and opportunities are incorporated into strategic planning, the result tends to be a more robust decision-making foundation, capable of sustaining growth and resilience in contexts of greater uncertainty.
One of the most immediate effects of this approach is the improvement in the quality of dialogue with investors and creditors, enhancing transparency and credibility. The connection between climate risks, capital decisions, and financial outlooks allows for a better understanding not only of the company’s exposure but also of the strategy guiding investment decisions.
Another significant opportunity is the anticipation of financial risks associated with sustainability and climate. By analyzing extreme physical risks, dependence on critical natural resources, or regulatory changes, companies can test the robustness of their strategies before these factors materialize into operational or financial losses.
In its first S2 report, Vale links physical risks—such as extreme weather events and water availability—to the resilience of its assets, operational continuity, and investment prioritization. In retail, Renner’s experience illustrates how climate and value chain risk analyses, when integrated with a clearer view of operational dependencies, guide initiatives for logistics efficiency, strengthening supplier relationships, and competitive positioning. In addition to mitigating risks, these initiatives reinforce competitive advantage in segments where environmental criteria already influence consumer and investment decisions.
By requiring an explicit link between sustainability, strategy, and financial performance, the standards encourage an integrated view of risks and opportunities, acting as catalysts for more informed decisions aligned with the future of the business. Anticipating this strategic integration, therefore, ceases to be merely preparation for a future obligation and becomes a management tool in the present—with clear potential for competitive differentiation.
Anticipation as a key element of implementation
The incorporation of the Strategy dimension into IFRS S1 and S2 requires companies to begin immediately a consistent assessment of their compliance with the standards, promoting greater integration between strategic planning, risk management, and sustainability. The gradual preparation through 2027 fosters gains in maturity, consistency, and quality of the disclosed information.
More than just anticipating a regulatory requirement, moving forward on this agenda now is an opportunity to strengthen strategic decision-making, enhance business resilience, and improve engagement with investors—especially when this process is supported by technical analysis and specialized expertise.
References
BRAZIL. Brazilian Securities and Exchange Commission. Circular Letter No. 1/2026/CVM/SNC/GNC. Rio de Janeiro, 2026
IFRS FOUNDATION. IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. London, 2023
“Report on Sustainability-related Financial Information in accordance with IFRS S2/CBPS 02.” Lojas Renner, 2025. Available at: https://www.lojasrennersa.com.br/wp-content/uploads/2025/07/Informacoes-financeiras-relacionadas-a-sustentabilidade-clima-IFRS-S1-e-S2-_-CBPS-1-e-2.pdf.
Report on Sustainability-Related Financial Information in accordance with IFRS S2/CBPS 02. Vale, 2025. Available at: https://api.mziq.com/mzfilemanager/v2/d/53207d1c-63b4-48f1-96b7-19869fae19fe/8b8371ec-4385-4955-4005-e98f71863296?origin=1.
CVM Resolution No. 193/2023. Available at: https://conteudo.cvm.gov.br/export/sites/cvm/legislacao/resolucoes/anexos/100/resol193consolid.pdf
João Henrique Bueno
