Brazil Reopens Debate Over Mandatory Sustainability Reporting for Companies

Brazil reopens its reporting debate

Brazil’s sustainability reporting rules are back under review. The country’s Securities and Exchange Commission (CVM) has opened a consultation on whether companies should disclose sustainability information voluntarily or face mandatory requirements, and what a revised system might look like. That puts the regulator back at a basic policy choice: how to encourage useful disclosures while accounting for the cost and effort they require. The consultation asks respondents to weigh those competing goals rather than treating the reporting model as settled.

The timing highlights a sharp change in direction. CVM first set out mandatory reporting for public companies in 2023, with disclosures due for fiscal years beginning on or after January 1, 2026. It later shifted to a voluntary, “comply-or-explain” model in May 2026, after amending its regulation. The sequence matters because companies had already been given a defined path toward reporting, then saw the requirement change. That can affect planning: businesses may have to decide whether to spend money preparing disclosures without knowing whether the same work will soon be required of them. A rule can be flexible on paper and still leave companies uncertain about what comes next.

A voluntary model with conditions

Under the current rules, companies that decide not to publish a sustainability report must explain that choice in a market announcement. Those that report must follow standards developed by Brazil’s Sustainability Pronouncements Committee (CBPS), which are based on the IFRS Foundation’s International Sustainability Standards Board requirements: IFRS S1 for general sustainability disclosures and IFRS S2 for climate information. CVM had approved the standards after introducing the original mandate. So the model doesn’t leave reporting companies free to choose any format they prefer; it pairs an optional decision to report with a specified framework. That distinction is important for investors comparing companies, though it can’t by itself ensure that every company will publish information.

Participation also comes with a commitment: companies that start reporting must continue for at least three consecutive years. A company that plans to stop must disclose its decision in a market announcement during the preceding fiscal year. The commitment may give investors a steadier run of information than a one-off report would, and it gives companies a clear period to plan around. But it also raises the cost of opting in: a company must consider several years of work before making its first disclosure. For firms with limited reporting capacity, the promise of flexibility may therefore come with a meaningful condition.

That compromise drew criticism from investment, accounting and governance groups. They warned that voluntary disclosure could leave investors with less comparable information, weaken alignment with international standards and reduce transparency. Their concern is structural: if companies choose whether to report, the information available to investors may vary from one company to another, even when the same standards are available. CVM says the new consultation will gather evidence on the costs and benefits of the available approaches. Here's the thing: a common standard can improve consistency among participating companies, but it can’t make participation universal on its own.

What CVM wants to test

The consultation asks respondents to assess several assumptions behind the policy debate. Among them: whether voluntary reporting can provide enough credible, comparable information; whether any reduction in companies’ cost of capital under a mandate could outweigh added compliance costs; and whether smaller firms would bear a larger burden relative to their size. These questions go to the practical test of the policy. A mandate could broaden the information available, but it would also require companies to devote time and resources to producing it. The consultation doesn’t settle how large either effect would be; it asks respondents to explain what they expect and why.

The question about smaller firms points to a familiar tension in reporting rules. Requirements can be easier for a large company to absorb because it may have more staff and systems available, while the same task can take up a greater share of a smaller firm’s resources. That doesn’t resolve whether a mandate is justified. It does mean that a single timetable or standard could have different practical effects across the market. If you're working in this space, the question is whether the policy can preserve comparable information while accounting for those differences.

CVM is also asking whether the three-year reporting commitment and other conditions could discourage companies from opting in. Another question concerns the effect of repeated rule changes: the regulator wants to know whether they have left companies with unrecoverable investments or made the policy environment harder to predict. That concern reaches beyond the immediate cost of preparing a report. When requirements change, companies may have to reassess work already underway, and uncertainty can make it harder to decide what to build into routine processes. And this is the part most people overlook: even a rule designed to ease compliance can create its own planning burden if companies expect it to change again.

Options on the table

The proposed paths range from keeping the existing system, possibly with different terms for voluntary participation, to introducing mandatory disclosure in stages. Options include phasing requirements in by company size, setting a future date for a return to mandatory reporting, or requiring climate disclosures while retaining a comply-or-explain approach for Scope 3 emissions. CVM is also considering whether a mandate should cover companies beyond those listed on public markets. Each option changes who reports, when they report, or which information they provide. The choices therefore have different implications for companies’ workloads and for the coverage and consistency investors can expect.

A phased approach could give some companies more time to prepare, while a future date for mandatory reporting could give businesses a clearer point to plan toward. A climate requirement paired with a comply-or-explain approach for Scope 3 emissions would draw a boundary between disclosures required under the option and those where companies could explain their approach. Extending a mandate beyond publicly listed companies would broaden its reach. Those are policy designs to assess, not outcomes already selected by CVM. The consultation is asking whether such distinctions address the concerns raised about cost, comparability and predictability.

What the decision could mean

That menu leaves the central question open: whether flexibility can produce useful, consistent disclosures, or whether a firm timetable is needed to secure them. The numbers here are underwhelming in one respect: the choice of model alone can’t guarantee that reports will be useful to investors. Their value also depends on what companies disclose and whether readers can compare that information across businesses. A mandatory system may widen coverage, while the current model gives companies a choice subject to conditions. Neither description answers the cost question, which is why CVM is seeking views on the assumptions behind each approach.

This is more significant than it looks. The decision could shape how companies plan sustainability reporting and how much information investors can expect to see under a shared framework. What this means for you depends on where you sit: companies must consider the time and cost of reporting, while investors and other users need disclosures they can compare. There’s no simple way to satisfy both aims without choosing how to distribute the burden. The consultation gives interested parties a chance to make that trade-off explicit.

The consultation remains open through February 28, 2027. The consultation document sets out the questions and alternatives. CVM’s next decision will depend on the evidence and views gathered through that process, so the current options shouldn’t be read as a final choice. For now, companies face a model that allows reporting by choice but attaches conditions to participation, alongside an open debate about whether that arrangement can meet the needs of the market. A decision on the rules still lies ahead.