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By Michael Kraten, PhD, CPA

A mere four months ago, International Financial Reporting Standards (IFRS) S1 and S2 were issued by the International Sustainability Standards Board (ISSB). For the first time, a major global entity with the authority to mandate corporate disclosures issued a wide array of sustainability reporting standards.

The issuance, though, came with a “catch.” Because S1 and S2 were classified as IFRS Sustainability Accounting Standards and not as IFRS Financial Accounting Standards, S1 and S2 were not immediate requirements in IFRS jurisdictions. Instead, each national government within the IFRS’ geographic coverage area was (and remains) free to adopt or ignore S1 and S2 as it sees fit.

Because government entities tend to move relatively slowly, few expected the nations of the world – and the largest nations in particular – to move rapidly towards adoption. Last week, though, the government of the ninth largest economy in the world did exactly that.

On October 20, 2023, the Brazilian Ministry of Finance announced that IFRS Standards S1 and S2 would be required by January 1, 2026, with voluntary use encouraged as early as 2024. Its simultaneous adoption of both standards was particularly noteworthy, given that S2 only addresses climate-related disclosures, while S1 addresses a broad array of sustainability-related information. In contrast, the U.S. Securities & Exchange Commission has only proposed a climate-related disclosure requirement.

To be sure, Brazil is not the first Latin American nation to mandate corporate sustainability disclosures. Chile, for instance, was the first major nation in the world to mandate corporate use of the guidance of the Sustainability Accounting Standards Board (SASB).

Nevertheless, with a “G-20” economy like Brazil’s taking the leap into a broad sustainability disclosure requirement, a trail has now been blazed for other regulatory bodies world-wide. And entities like the ISSB and the SASB (which has been embraced by the ISSB) have further cemented their positions in the vanguard of the ESG reporting movement.

Originally published at All rights reserved by author.