Brazil has withdrawn plans to make sustainability reporting under the International Sustainability Standards Board (ISSB) framework mandatory, retaining a voluntary approach to environmental, social and governance (ESG) disclosures.

This implies that firms operating within Brazil do not need to comply with the ISSB standards for sustainability-related financial reporting. Companies can choose to report ESG data on a voluntary basis through their existing ESG reporting strategies or any other reporting frameworks.

The ISSB standards, which were rolled out by the IFRS Foundation in 2023, are designed to help create a global baseline for sustainability-related financial disclosures. These guidelines are concerned with disclosing sustainability risks and opportunities that have an impact on a firm's financial results.

Mandatory compliance with the standards was expected from Brazil but has since been ruled out.

It occurs amid the ongoing divergence in regulatory approaches to sustainability disclosures around the world. Some jurisdictions have implemented mandatory sustainability disclosures and climate disclosures, while other jurisdictions have chosen a voluntary or phased-in approach.

Advocates of mandatory reporting emphasize how standardized disclosures increase transparency and make company comparison easier for investors. The corporate community and various industry associations have cited high costs associated with mandatory reporting.

In addition, companies wishing to attract foreign investments may decide to report in line with ISSB standards despite the absence of mandatory regulations.

It means that, under the decision made, the ESG reporting framework in Brazil is based on voluntary disclosure and not mandatory application of the ISSB standards.