ISSB – And Brazil – Survive Brazil’s Reporting U-Turn From Mandatory To Voluntary
In May 2026, Brazil’s Securities and Exchange Commission (CVM) softened its planned mandatory sustainability reporting regime through Resolution 244, shifting ISSB-aligned disclosures to a voluntary ‘comply-or-explain’ model. The move is a striking reversal. In 2023, Brazil became the first country to formally commit to aligning domestic sustainability disclosures with the International Sustainability Standards Board’s (ISSB) IFRS S1 and S2. It has since strengthened its sustainability credentials through hosting COP30 and developing broader ESG policies (see Verdantix Strategic Focus: Understanding ESG And Sustainability Regulations In Brazil).
Despite this U-turn, Brazil has not dismantled its implementation of the ISSB framework. Firms that choose to disclose will still report under the Brazilian Sustainability Pronouncements Committee (CBPS) standards, CBPS 01 and 02, which align with IFRS S1 and S2. Organizations that opt out must publicly explain why.
In this context, four implications stand out:
- Voluntary reporting and enforcement will continue to be driven by investor pressure.
As the CVM steps back from mandatory reporting, investors will play a larger role in shaping disclosure practices. Resolution 244 changes the legal obligation to report, but not necessarily market expectations. Preliminary results from our upcoming 2026 ESG global corporate survey suggest that investors are pressuring organizations to disclose additional social and environmental metrics compared with 2025. This aligns with our 2026 predictions: sustainability reporting enforcement is increasingly moving from regulators to the market (see Verdantix Market Insight: 10 Predictions For ESG & Sustainability In 2026 And Beyond).
- ISSB-aligned reporting may become a signal of market-leading firms.
Under a mandatory regime, ISSB-aligned reporting would have become a baseline compliance requirement for listed firms. Under a voluntary regime, the decision to report becomes more meaningful. Continuing to disclose may signal stronger governance, more mature data systems and greater exposure to international markets (see Verdantix Strategic Focus: The Business Case For Sustainability Reporting Software In 2026). Opting out may be defensible for some issuers, but the explanation will matter. This could make ISSB alignment less of a universal regulatory floor and more of a marker of issuer readiness.
- Weaker comparability will become a salient risk for investors.
A major issue is that reporting could become more uneven. Mandatory reporting would have created a common floor across Brazil’s public markets, pushing listed firms to improve internal processes and data. A voluntary model does less to bring slower-moving organizations to the same standard. Although some firms will continue reporting under ISSB, others will delay and pull back. For investors, this creates a more fragmented picture of governance practices and sustainability-related data – and, therefore, weaker comparability.
- Global ISSB adoption will embrace both voluntary and mandatory reporting.
Brazil’s reversal is a useful reminder that regulatory momentum is not linear, nor a voluntary-or-mandatory binary, despite the growing momentum of ISSB alignment worldwide. This development joins Canada’s stalled mandatory timeline and the EU’s decision not to align its reporting standards with ISSB as part of a broader pattern: political and implementation pressures are creating gaps between ambition and execution. This points to a more complicated phase for global sustainability reporting: ISSB remains influential, but convergence is still an ambition – its role depending more heavily on domestic politics and investor pressure.
For more shifts on ISSB alignment around the globe, see:
About The Author
Catalina Fazio
Analyst
