The Securities and Exchange Commission (SEC) is raising the bar on how domestic companies report environmental and social impacts by adopting new sustainability disclosure standards intended to bridge the gap between local practices and global norms.
SEC Memorandum Circular No. 16, Series of 2025, issued on Dec. 22, adopts the Philippine Financial Reporting Standards (PFRS) on Sustainability Disclosures.
The guidelines aim to assist covered firms in producing reports that investors and stakeholders can compare across international markets. The circular specifically adopts PFRS S1 for general sustainability-related financial disclosures and PFRS S2 for climate-related disclosures, replacing a 2019 mandate that only applied to publicly listed companies.
The new standards align with International Financial Reporting Standards developed by the International Sustainability Standards Board. The move follows similar regulatory shifts in Southeast Asian markets including Singapore, Thailand, Malaysia and Indonesia.
SEC chairperson Francis Lim said the adoption of the PFRS on Sustainability Disclosures underscores a commitment to high-quality, comparable and globally aligned reporting.
“By elevating the standards of sustainability reporting in the Philippines, we hope to enable more companies and stakeholders to better understand the financial impacts of sustainability-related risks and opportunities, supporting long-term value creation and improved capital allocation decisions,” Lim said.
Implementation will follow a tiered schedule beginning in fiscal year 2026. Tier 1 includes large listed firms with market capitalization above P50 billion as of Dec. 31, 2025.
These entities will begin reporting in 2027 to cover the 2026 fiscal year. Tier 2 consists of listed companies with market capitalization between P3 billion and P50 billion, with adoption starting for fiscal years beginning Jan. 1, 2027.
Tier 3 covers smaller listed firms, companies with only debt securities listed and large nonlisted entities with annual revenue exceeding P15 billion. This group will begin adoption in 2028. Publicly listed companies and large nonlisted entities covered by the Securities Regulation Code must submit board-approved sustainability reports alongside annual reports, while other large companies must attach them to audited financial statements.
To ease the transition, the regulator is maintaining some flexibility. Existing rules will remain in effect until companies reach their specific adoption year, and firms may continue using recognized frameworks for fiscal year 2025 reports.
Tier 1 and Tier 2 companies may focus exclusively on climate-related risks and opportunities for 1 year, while Tier 3 firms are granted 2 years for this focus. Companies will have up to 9 months from the end of a reporting period to submit sustainability reports if no interim financial statements are issued.
Comparative disclosures are not required initially. Companies may use alternative emissions accounting methods for 1 year and delay reporting Scope 3 greenhouse gas emissions for 2 years.
The SEC said the framework is intended to strengthen transparency and help investors assess sustainability risks as global standards evolve.
