Companies are increasingly adopting the practice of reporting their annual sustainability actions. This practice is also a requirement for those publicly traded on the stock exchange, such as the Corporate Sustainability Index (ISE) of B3[1].
However, it is important to emphasize that companies should report their practices ethically, transparently, and truthfully. Sustainability Reports serve to demonstrate to stakeholders (employees, customers, suppliers, investors, shareholders, the community, etc.) the initiatives developed throughout the year, including actions related to the ESGpillars. Global Sustainability Reports account for the actions companies have undertaken from January 1st to December 31st each year and should be published annually.
Importance of Sustainability Reports
These reports are crucial communication tools and also serve as internal management instruments, enabling companies to review and plan progress, develop long-term strategies, and communicate their short/medium-term plans to stakeholders.
Types of Reports: ESG Performance Report and Sustainability Report
There are two main types of reporting, starting with the simpler "ESG Performance Report". For this type of report, companies are not required to follow a specific methodology, although they may refer to frameworks such as the GRI (Global Reporting Initiative). This approach allows companies to freely showcase their annual actions to the market and is an excellent way to begin reporting for those who have never published reports before.
A more comprehensive approach is the "Sustainability Report". As previously mentioned, publicly traded companies are required to produce this type of report, but it is not limited to them. Any company at a more mature level can adopt these methodologies.
International Standards and Methodologies
One of the most well-known practices and the best method for reporting is the GRI (Global Reporting Initiative). The GRI[2] is an independent international standards organization that helps companies, governments, and other organizations understand and communicate their environmental, social, and corporate governance impacts. It provides the most widely used sustainability reporting standards globally, covering topics from biodiversity to taxes, waste to emissions, and diversity and equality to employee health and safety.
Additionally, companies reporting their actions through the Sustainability Report are required to conduct their materialityassessments, as outlined in GRI 3 (Material Topics).
Other existing methodologies worth mentioning include SASB (Sustainability Accounting Standards Board), TCFD (Task Force on Climate Related Financial Disclosures) , among others.
New ESG Accounting Rules in Brazil
A new aspect that companies need to be aware of is the new Brazilian ESG accounting rule. Starting in 2026, national publicly traded companies will be required to include mandatory reporting on climate risks and ESG practices in their financial statements, as stipulated by CVM (Comissão de Valores Mobiliários) Resolution 193.
In 2023, the ISSB (International Sustainability Standards Board) published the first standards on these new rules, which are IFRS S1 and IFRS S2:
- IFRS S1 addresses general sustainability disclosures, including strategy, governance, risks, opportunities, performance, and ESG targets.
- IFRS S2 focuses on climate-related disclosures, following the guidelines of TCFD (Task Force on Climate-Related Financial Disclosures), such as actions related to emissions, climate adaptation, and resilience.
This presents an excellent opportunity for companies looking to go public to adapt to these new developments and begin their sustainability reporting.
In conclusion, reporting practices are becoming increasingly strategic for companies, helping them identify and mitigate risks, explore new opportunities, and demonstrate transparency to the market and stakeholders.
[1] https://iseb3.com.br/
[2] https://www.globalreporting.org/
