Flash News NA 2025/07/24
The Transition of Portuguese SMES to IFRS S1 and S2 (ESRS): Accounting Challenges and Growth Opportunitieso

1. Introduction to the New Regulatory Framework
The Directive CSRD (Corporate Sustainability Reporting Directive) requires European companies, including some SMEs that are part of supply chains or have access to international markets, to present integrated reports based on the ESRS standards. These standards are equivalent to IFRS S1 (sustainability-related disclosures) and IFRS S2 (climate-related disclosures). The standards will come into force in stages from 2025–2026 for larger companies, gradually extending to smaller entities.

2. Scope and Implementation Deadlines

  • Listed companies and large groups in Portugal are already subject to these requirements as from 2025–2026.
  • SMEs that form part of value chains, serve as suppliers to larger companies subject to reporting requirements, or operate outside the EU may also fall under the scope.
  • The implementation calendar will be phased in, with mandatory annual sustainability reporting for many SMEs from 2027–2028 onwards.

3. Accounting and Tax Impact on SMEs

From an accounting perspective, adopting IFRS S1 and S2 entails:

- Quantifying and recognising provisions for ESG (environmental, social, and governance) risks.

- Valuing the financial impacts associated with climate events and the energy transition.

- Integrating non-financial information (e.g. emissions, resource consumption, social indicators) into the annual reporting process.

From a tax perspective, this leads to:

- The need for greater detail in the SAF-T file, including records of environmental, social, or governance-related costs.

- Potential revisions to existing tax deductions relating to green investments.

- Adjustments to impairment, depreciation, and provision accounts with an impact on the corporate income tax base (IRC).

4. Commercial and Reputational Advantages

  • Customers and investors increasingly value transparency and sustainability: SMEs capable of reporting under IFRS S1/S2 gain credibility and a competitive edge.
  • Facilitates access to sustainable finance (green loans, European incentives).
  • Positions the SME as aligned with best ESG practices, reinforcing brand image and stakeholder trust.

Conclusion

The adoption of IFRS S1 and S2, in connection with the CSRD/ESRS Directive, marks a new level of both regulatory demands and strategic opportunity, across accounting and tax domains. Portuguese SMEs now have the chance to transform themselves, aligning with European sustainability standards and enhancing their reputation as responsible and transparent businesses.

Nominaurea is available to provide full technical, accounting, and tax support throughout this transition.