The Securities and Exchange Commission (SEC) of the Philippines has issued draft guidelines for the adoption of Philippine Financial Reporting Standards (PFRS) in the preparation of sustainability reports by publicly listed companies (PLCs) and large non-listed (LNL) entities.
In a notice, the SEC’s Corporate Governance and Finance Department released for public comment a draft memorandum circular on the adoption of PFRS for sustainability disclosures and the issuance of reporting guidelines for PLCs and LNLs.
The move follows the Commission En Banc’s approval on 29 July of the adoption of PFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, and PFRS S2, Climate-related Disclosures, along with updated sustainability reporting guidelines for both PLCs and LNLs.
According to the draft, the guidelines aim to promote sustainable business practices and align corporate disclosures with international standards to attract Environmental, Social and Governance (ESG)-focused investors. They are also intended to help companies assess and manage their non-financial performance, including economic, environmental, social and governance factors, while tracking contributions to global and national sustainability goals such as the UN Sustainable Development Goals and the AmBisyon Natin 2040 framework.
Currently, only PLCs are required to submit sustainability reports under SEC MC No. 4, Series of 2019. The draft circular would expand this requirement to include certain LNLs, with reports to be attached to annual reports for PLCs and to audited financial statements for LNLs not covered by the Securities Regulation Code (SRC).
The guidelines propose a phased implementation based on company size:
- Tier 1: PLCs with market capitalisation above PHP 50 billion as of 31 December 2025 (or at the time of listing after 2025) must adopt the PFRS S1 and S2 formats for fiscal years starting on or after 1 January 2026, with reports due in 2027.
- Tier 2: PLCs with market capitalisation between PHP 3 billion and PHP 50 billion must begin reporting in 2028, covering fiscal years from 1 January 2027.
- Tier 3: PLCs with market capitalisation of PHP 3 billion or less, and LNLs with annual revenue above PHP 15 billion, must report in 2029 for fiscal years from 1 January 2028.
From fiscal year 2026 onwards, companies must use the PFRS S1 and S2 standards, though in 2025 they may follow any internationally recognised framework. A mandatory limited assurance on Scope 1 and 2 greenhouse gas emissions by an independent assurance provider is planned two years after each tier’s implementation date.
To ease the transition, the SEC will provide relief measures, including reduced disclosure requirements for the first year or two depending on tier, no requirement for comparative data in the first year, flexibility in greenhouse gas calculation methodologies for one year, and no Scope 3 emissions disclosure for the first two years.
Exemptions will also be available for LNLs if their parent company already produces sustainability-related disclosures in the Philippines that include the subsidiary. Non-compliance by PLCs — such as failing to attach sustainability reports to annual reports — will attract penalties under existing SEC resolutions. Penalties for LNLs will be addressed in future issuances.
