To Report or Not to Report: The New ESG Dilemma

Over the past several months, the regulatory landscape for sustainability reporting has taken some unexpected turns. Europe dramatically scaled back the scope of the CSRD through the Omnibus I package. Brazil, which was on track to become one of the most demanding ESG disclosure regimes among emerging markets, reversed its mandatory reporting requirement. And in the United States, federal action on sustainability disclosure remains at a standstill.

For many executives, the immediate read is tempting: if regulators are stepping back, why keep investing in sustainability reporting? The answer, supported by the most recent evidence, is clear — and understanding it is a competitive advantage today.

Regulatory rollback does not equal a reduction in reputational, financial, or strategic risk.

What Actually Changed — and What Didn't

Through the Omnibus I package — politically agreed by the European Parliament in December 2025 and formally signed off by the Council in early 2026 — the EU substantially amended the CSRD (Corporate Sustainability Reporting Directive). It raised the applicability thresholds and, through the simplified ESRS, cut the number of mandatory data points by roughly 60%. The result: an estimated around 90% of companies originally within scope are no longer obligated to report under this framework.

In Brazil, on May 27, 2026, the securities regulator CVM (through Resolution CVM 244) reversed its mandatory ISSB-aligned reporting requirement for publicly listed companies, adopting instead a voluntary "comply-or-explain" model effective from 2027.

The change aims to preserve transparency and comparability while restoring respect for entities' freedom to assess the expected costs and benefits of their decisions.

— Comissão de Valores Mobiliários (CVM), Brazil

What didn't change is equally significant: European banks remain required by the European Banking Authority (EBA) to consider climate risks when issuing loans. This means SMEs and mid-sized companies no longer obligated to report under regulation will still face pressure to disclose ESG information — through their lenders and their larger customers who remain within CSRD scope.

The Market Speaks Louder Than the Regulator

Here is the data point that should matter most to any sustainability director or CFO: according to a 2026 survey by software firm osapiens, 90% of European companies no longer required to report under the CSRD plan to maintain or even expand their voluntary sustainability reporting activities.

Why? Because sustainability data is no longer just a compliance requirement — it is a strategic input. Companies use it to manage supply chains, design products, access green finance, and meet investor and customer expectations.

The figures from the CDP (Carbon Disclosure Project) in its 2026 Corporate Health Check confirm this: the number of organizations disclosing their environmental data surpassed 23,000 in its latest cycle, representing nearly two-thirds of global market capitalization. The true differentiating factor is financial: companies rated at CDP's environmental-leadership level realized USD 218 billion in environmental opportunities over the past 12 months — evidence that environmental excellence correlates with growth and capital attraction.

What the world's top consulting firms are reporting

This profitability-driven view is echoed by the leading global advisory firms, whose 2026 analyses reframe sustainability from cost center to value driver:

The Waterfall Effect in the Value Chain (B2B)

While state regulators may have paused certain reporting requirements, the commercial market has not. A clear example of this "waterfall effect" — or de facto regulation — is SME participation: in the latest CDP reporting cycle, thousands of small and medium-sized enterprises chose to voluntarily disclose their data.

The primary reason is straightforward: European and North American multinationals — their corporate clients — demand this data to meet their own Scope 3 climate targets. Today, the B2B commercial market acts as a faster and stricter regulator than the State itself. Without consistent ESG data, suppliers risk being directly excluded from the international supply chain.

What This Means for Companies in Europe and Latin America

For companies in Europe, the current scenario is one of active regulatory uncertainty. Even after the Omnibus narrowed the CSRD, several member states — Spain among them — have yet to fully transpose the directive into national law, leaving the precise obligations in flux. This is not a pause; it is a signal that the regulatory architecture will keep evolving, and companies that prepare now will have a real advantage when definitive frameworks are established.

For companies across Latin America — particularly those that export to Europe, supply multinationals, or access international financing — the message is the same: the demand for ESG transparency does not come only from regulators. It comes from commercial counterparties, banks, and investors.

Brazil may have made ISSB reporting voluntary, but Brazilian companies that choose not to report will be required to publicly explain that decision starting in 2027. Across the rest of the region, scrutiny from impact funds, multilateral banks, and value-chain standards set by European and North American companies already functions as de facto regulation.

The Right Strategic Position

Regulatory rollback is not an invitation to inaction — it is an opportunity to build a more robust reporting practice, focused on what genuinely matters to the business rather than on checking compliance boxes.

The companies that emerge strongest will not be those that waited for regulatory clarity — but those that used this pause to build stronger, strategy-linked information systems.

The regulatory pendulum will keep swinging. The question is whether your company is ready for when it returns — with reporting that is relevant, credible, and aligned with current international standards, regardless of where the pendulum stands at any given moment.

About the author

Nathalie Yabrudy González

Managing Consultant · Yabrudy Solutions

Nathalie advises companies across Europe and Latin America on sustainability, ESG reporting strategy, Decarbonization, Climate Risk Management and Reduction — Tracking Impact, Shaping Solutions.

yabrudysolutions.com · ny@yabrudysolutions.com