For years, many companies filled their annual reports with images of forests, promised carbon neutrality for decades to come and celebrated small initiatives as if they were structural revolutions. The market applauded, investors approved, and no one was shown the bill. Now that time is over, and not because of a spontaneous change of conscience in the corporate world, but because regulation has finally arrived with precision.
Publication of standards IFRS S1 and IFRS S2, The International Sustainability Standards Board (ISSB), which launched two international standards in 2023, marks the turning point in this cycle by establishing, respectively, general requirements for the disclosure of sustainability risks and opportunities with a financial impact (S1) and specific requirements on climate risks, including greenhouse gas emissions and transition targets (S2). Together, these standards transform data ESG in verifiable and auditable information, with no more room for narratives without numbers.
Brazil, through the CVM Resolution 193/2023, The United Kingdom was the first country in the world to incorporate these standards into its regulatory framework, making it compulsory for all listed companies to disclose financial information related to sustainability from 2026 onwards. The clock is already ticking and companies that have not yet started to comply are literally behind schedule.
What greenwashing is and why it has become a legal risk
The term greenwashing, derived from the combination of the English words green (green) and washing (greenwashing) is the practice of artificially constructing or amplifying an image of social and environmental responsibility that does not correspond to the reality of the company's operations. It is not necessarily an outright lie, as greenwashing can manifest itself through omission, convenient selection of data, ambiguous language or isolated projects presented as if they represented the whole of the corporate strategy.
In practice, greenwashing comes in many forms. A company can advertise ambitious climate targets for decades to come without any concrete plan in the present. It can label products as “sustainable” based on an isolated attribute, such as recycled packaging, while ignoring the impact of the entire production chain. Or it can publish sustainability reports rich in narrative and poor in verifiable data, projecting an ESG image that the numbers don't support.
For a long time, this kind of practice went without consequences. The environment was lax, disclosure standards were vague and there was no obligation to subject ESG claims to any verification. What has changed is not just awareness of the problem, but the institutional architecture around it.
Today, investors and the judiciary itself have come to treat these reports as market value information and are therefore liable when they turn out to be false or misleading. Regulators in different parts of the world have started to open investigations, issue fines and, in more serious cases, classify greenwashing as a criminal offense. The market has learned to distinguish between those who do and those who just talk. And in Brazil, regulation has come to make this distinction official.
ESG as a real competitive advantage
There are still those who see ESG as one more obligation to fulfill, one more cost line in the budget, one more report to hand in at the end of the year. As well as being wrong, this view is becoming increasingly expensive. Because what the data shows is just the opposite: companies that take ESG seriously are coming out ahead, and not just in words.
One research KPMG's 2025 survey of 1,320 senior executives and board members produced figures that deserve attention. Among the companies that have already adopted robust ESG assurance practices, 60% expect to gain more market share or expand their client base, 54% project improved profitability and 52% see a direct boost to their reputation. These are not abstract projections, as they are executives reporting what they are already reaping, or about to reap, as a result of choices they made before their competitors.
Aligning with the IFRS S1 and S2 standards in a genuine way, therefore, is a sound business decision. Conducting rigorous materiality assessments, structuring audit-resistant data collection systems and integrating the financial narrative with the sustainability narrative are moves that strengthen the company from the inside and make it more attractive from the outside. Every month's delay in this structuring is time that the market no longer expects.
Companies that recognize this today turn the regulatory obligation into a real competitive advantage, while those that put it off accumulate not only legal liabilities, but a strategic distance that is difficult to recover. What is at stake is not just compliance with an accounting standard, but the definition of which companies will be considered reliable, strategic and bankable over the next ten years.
Sustainability has gone from being a reputational attribute to becoming a survival variable in the global corporate ecosystem. Companies that understand this now, and act accordingly, will not only be avoiding risks, they will be building the basis of a competitiveness that time, more than any regulation, will confirm.
Companies that understand this now, and act accordingly, will avoid regulatory or reputational risks and will be building a solid foundation of competitiveness, anchored in the ability to measure, report and capture value from their ESG initiatives, something that time, more than any regulation, will confirm.