The SEC’s New Sustainability Reporting Rules Explained

By: Jean Francois "Punch" Rivera III and Camille Alexandra Prollamante

For years, sustainability reporting in the Philippines largely operated on a “comply or explain” framework.

Companies talked about environmental initiatives, governance practices, social responsibility programs, and climate commitments, often using varying standards and differing levels of detail. Some disclosures were comprehensive. Others were little more than polished corporate language.

That landscape is about to change significantly.

Through SEC Memorandum Circular No. 16, Series of 2025, the Securities and Exchange Commission formally adopted the Philippine Financial Reporting Standards (PFRS) on Sustainability Disclosures, specifically PFRS S1 and PFRS S2.

At first glance, the circular sounds highly technical. In reality, however, the shift is quite simple.

The SEC is effectively telling covered companies: sustainability disclosures are no longer optional side narratives. They are becoming part of formal corporate reporting infrastructure.

Under the circular, publicly listed companies and certain large non-listed entities will now be required to submit Sustainability Reports using internationally aligned disclosure standards.

The rules are based on the IFRS Sustainability Disclosure Standards developed by the International Sustainability Standards Board. The goal is to make sustainability reporting more consistent, comparable, and useful to investors.

In practical terms, this means companies can no longer simply speak in broad terms about “supporting sustainability” without structure behind the disclosures.

The circular introduces formal reporting obligations, phased implementation schedules, board-level oversight, and eventually, external assurance requirements for certain greenhouse gas disclosures.

Importantly, implementation will not happen all at once.

The SEC adopted a tiered rollout system.

Large publicly listed companies with market capitalizations exceeding PHP 50 billion will begin implementation first for fiscal years beginning on or after January 1, 2026. Mid-sized listed companies follow in 2027. Smaller listed companies, debt-listed issuers, and qualifying large non-listed entities come later.

For non-listed entities, the threshold is substantial. The rules generally apply only to entities with annual revenues exceeding PHP 15 billion.

This is important because many small and medium enterprises may initially assume the rules apply to them directly. In most cases, they do not.

At least not yet.

Still, the effects may eventually trickle down through supply chains, financing relationships, procurement standards, and investor expectations.

One notable aspect of the circular is that sustainability reporting will now require board approval prior to issuance.

That changes the nature of the discussion internally.

Once disclosures are elevated to board-level review, sustainability reporting becomes less of a marketing exercise and more of a governance issue.

The SEC also recognized that immediate full compliance would be difficult.

As a result, the circular contains several temporary transition reliefs.

For a limited period, companies may initially focus only on climate-related disclosures. Certain comparative information may temporarily be omitted. Scope 3 greenhouse gas emissions disclosures are likewise temporarily not required.

These reliefs acknowledge a practical reality: many companies are still developing internal systems capable of measuring sustainability-related metrics reliably.

Another major development is the eventual introduction of mandatory external assurance for Scope 1 and Scope 2 greenhouse gas emissions.

In simpler terms, certain sustainability disclosures will eventually need independent verification.

That alone signals how seriously sustainability reporting is beginning to be treated.

Traditionally, financial statements carried the weight of formal verification and audit scrutiny. Sustainability disclosures often did not.

That gap is gradually narrowing.

To be clear, SEC Memorandum Circular No. 16 is not an “anti-greenwashing law.”

Its primary purpose is not to punish exaggerated ESG marketing claims. Rather, it establishes a standardized sustainability disclosure framework aligned with international reporting systems.

Still, the practical effect is difficult to ignore.

As reporting standards become more structured, measurable, and verifiable, the space for vague sustainability claims naturally becomes smaller.

In many ways, the circular reflects a broader shift happening globally.

Investors increasingly want sustainability information that is measurable rather than aspirational. Regulators increasingly want disclosures that are comparable rather than promotional. Markets increasingly expect sustainability claims to be supported by actual reporting systems and governance structures.

The Philippines is now clearly moving in that direction as well.