IFRS S1 and S2 in Brazil: Current Overview and Outlook

March 30, 2026 / João Vitor Souza and Alexandre Fioravante

The publication of IFRS S1 and IFRS S2 in June 2023 did not come as a surprise. It consolidates a movement that had been gaining momentum over the past decade: the attempt to bring sustainability issues to the same level of discipline, consistency, and relevance as financial information.

Until then, most initiatives operated under voluntary frameworks, with diverse methodologies and objectives that did not always align — which, in practice, resulted in reports that were difficult to compare and often poorly connected to the economic and financial implications for organizations.

In this context, the new IFRS S1 and S2 standards emerge with the purpose of establishing a common disclosure framework, geared toward investor decision-making, while strengthening the consistency, comparability, and usefulness of sustainability information in the capital markets.

The central proposal of the new standards is clear and ambitious: to establish a global baseline for the disclosure of sustainability information that is effectively useful for investment decision-making, meeting the needs of the primary users of financial statements.

In Brazil, this movement has moved beyond being merely an international trend and has formally become part of the regulatory framework with the publication of CVM Resolution No. 193/2023¹. The adopted timeline follows a gradual transition approach: voluntary adoption starting in 2024 and mandatory for publicly traded companies starting in 2027, with reporting covering the 2026 fiscal year.

According to the CVM (Securities and Exchange Commission of Brazil), the decision reflects the country’s alignment with a regulatory transformation already underway in various jurisdictions. Initial evidence suggests the speed of this process. A study conducted by the University of Oxford shows that, in Turkey, most companies published reports aligned with the new standard as early as the first year of adoption. At the same time, the study reveals significant differences in how key concepts — such as materiality, the definition of climate scenarios, and the setting of targets — were interpreted by organizations.

In other words, regulatory adoption tends to occur relatively quickly, while institutional maturity develops gradually.

In this transformative landscape, some companies still view the new agenda as yet another regulatory obligation: “just another report,” “more costs,” “yet another requirement.” This perspective, however, underestimates the nature of the change underway.

What the International Sustainability Standards Board (ISSB) standards propose is not just a new report, but a shift in the language through which companies communicate their risks and future prospects to the market. For the first time, risks and opportunities related to sustainability and climate are explicitly addressed under the same logic applied to the analysis of any factor capable of affecting a company’s value: financial impact, materiality, and economic implications over time and under different scenarios.

The debate shifts from focusing exclusively on institutional commitments or reputational stances to being structured around risk, performance, resilience, and potential impacts on cash flows.

Materiality Matters

The economic literature offers relevant evidence on the relationship between financial materiality and the economic effects associated with corporate performance. Studies conducted by the Association of Chartered Certified Accountants (ACCA) in 2017 indicate that the adoption of international reporting standards has been associated, in different contexts, with a reduction in the cost of capital and improved access to financing; especially when accompanied by robust oversight and regulatory enforcement mechanisms.

This body of evidence helps explain a gradual shift in the field of corporate sustainability. The traditional approach based on impact materiality, widely used in sustainability reports, has progressively given way to approaches guided by financial materiality or, in many cases, by double materiality.

These frameworks provide an analytical structure that allows companies to prioritize risks and opportunities with the greatest potential for economic impact and to focus their IFRS reporting on those issues with the highest financial relevance.

Under the ISSB standards, materiality follows the same principle applied to financial statements: information is considered material when its omission, misstatement, or obscuring could influence the decisions of the primary users of corporate reports.

In this context, companies must identify and disclose sustainability risks and opportunities capable of affecting their financial outlook. Although IFRS standards do not prescribe a specific methodology for this identification, organizations are expected to be able to consistently demonstrate the rationale used to determine which issues are materially relevant to investors.

Furthermore, with this clear vision, companies will be able to prioritize resources, manage potential losses, and improve their access to financing by utilizing frameworks widely adopted in the market. IFRS standards do not dictate how companies should report their risks and opportunities, but they do expect companies to demonstrate a sound rationale for how they arrived at these results.

Current adoption level and future outlook

In Brazil, the process of implementing these standards is still in its early stages. According to recent studies by the CVM, a significant number of companies are in the initial stages of preparation, which can range from conducting assessments of compliance with the standards to engaging the various departments involved and structuring the data collection process.

However, companies such as Vale and Renner have already taken the lead by voluntarily disclosing IFRS standards as early as 2025, while seven other companies have already publicly announced that they will join the pioneers in reporting in 2026.

This movement occurs in parallel with the identification of relevant operational challenges. Among the points most frequently mentioned by companies are the need to improve data collection systems, develop measurement methodologies, and integrate information from different organizational areas.

In light of these challenges, the Brazilian Association of Publicly Traded Companies (ABRASCA) made a formal appeal to the CVM in 2025, requesting an extension of the mandatory deadline due to the various challenges companies have faced in adopting the standard.

The CVM responded via Official Letter No. 1/2026, reiterating that the deadlines remain unchanged and noting that Resolution 193 already provides transitional relief and mitigating measures, particularly for smaller companies. Furthermore, it stated that the Commission’s technical department is considering adjustments to the resolution to clarify certain IFRS requirements.

The fact is that now is the time for companies to get organized, understand how well they comply with the standards, and move toward a concise and strategic reporting of their sustainability and climate risks and opportunities.

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