Understanding ESG Disclosure Obligations for Publicly Listed Companies

For years, sustainability reporting in the Philippines operated on a “comply or explain” basis — companies could disclose what they had and explain the rest. That era has now ended. The Securities and Exchange Commission (SEC) has moved to mandatory, standardized ESG disclosure, and publicly listed companies need to understand exactly where they fall in the new compliance timeline.

From Voluntary to Mandatory: What Changed

The SEC first introduced sustainability reporting for listed companies through Memorandum Circular No. 4, Series of 2019, which applied only to publicly listed companies (PLCs) and allowed a flexible, explain-the-gaps approach. On 22 December 2025, the SEC issued Memorandum Circular No. 16, Series of 2025, formally adopting the Philippine Financial Reporting Standards (PFRS) on Sustainability Disclosures — fully aligned with the International Sustainability Standards Board’s (ISSB) IFRS S1 and S2 standards. This repeals the old 2019 circular’s mandatory framework and closes the “comply or explain” chapter for good.

“The adoption of the PFRS on Sustainability Disclosures underscores our commitment to high-quality, comparable, and globally aligned sustainability reporting.”

Who’s Covered — and When

The new rules widen the net beyond listed companies alone. Both PLCs and Large Non-Listed Entities (LNLs) — those with annual revenue exceeding PHP 15 billion — must now submit sustainability reports. Implementation follows a three-tier, phased rollout based on market capitalization and revenue:

• Tier 1 – PLCs with market capitalization exceeding PHP 50 billion as of 31 December 2025. These companies apply the standards starting fiscal year 2026, with first reports due in 2027.
• Tier 2 – Listed companies with market capitalization above PHP 3 billion up to PHP 50 billion. These apply the standards to fiscal years beginning on or after 1 January 2027, with first reports due in 2028.
• Tier 3 – Listed companies with market capitalization of PHP 3 billion or less, companies with only debt securities listed on the Philippine Dealing & Exchange Corp., and LNLs meeting the revenue threshold. Adoption begins in fiscal year 2028, with first reports due in 2029.

For groups with a parent company, revenue thresholds are assessed at the consolidated level rather than on a standalone basis — so subsidiaries can’t avoid coverage simply because their individual revenue falls under the threshold.

The Four Pillars of Disclosure

PFRS S1 and S2 organize sustainability and climate disclosures around four consistent pillars:

Governance – How the board and management oversee sustainability- and climate-related risks and opportunities, including how these are factored into major business decisions.
1. Strategy – The entity’s approach to managing sustainability- and climate-related risks and opportunities, and how they affect the business model.
2. Risk Management – The processes used to identify, assess, and manage these risks.
3. Metrics and Targets – Quantitative data and targets used to track performance, including greenhouse gas (GHG) emissions.

PFRS S1 covers general sustainability-related financial disclosures, while PFRS S2 focuses specifically on climate-related risks and opportunities.

Transition Reliefs Worth Knowing

The SEC has built in meaningful breathing room for companies adjusting to the new framework:

• Tier 1 and Tier 2 companies may disclose only climate-related risks and opportunities for their first year of reporting; Tier 3 companies get a two-year transition period for the same relief.
• Comparative period data is not required during the transition.
• Companies may use GHG measurement methods other than the GHG Protocol for one year.
• Scope 3 emissions disclosure is not required for the first two years.
• Covered entities have up to one year after publishing financial statements to submit their sustainability report — either alongside interim financial disclosures, or within nine months of the reporting period’s end if no interim statements are issued.

A New Requirement: Mandatory External Assurance

Perhaps the most significant shift from the 2019 framework is the introduction of mandatory assurance. Under the old rules, PLCs faced no requirement to obtain third-party verification of their sustainability disclosures. Under the new Circular, covered entities must obtain limited external assurance on Scope 1 and Scope 2 GHG emissions from an independent practitioner — either a Certified Public Accountant or a qualified public non-accountant — two years after their initial implementation of PFRS S1 and S2. Over time, the SEC has signaled this will progress toward a “reasonable assurance” standard, a higher bar than limited assurance.

Practical Steps for Listed Companies

1. Confirm your tier. Check your market capitalization as of 31 December 2025 against the thresholds to determine your applicable fiscal year and first reporting deadline.
2. Start data collection early. Even companies in Tier 2 or Tier 3 should begin building GHG emissions tracking and governance documentation well ahead of their mandatory start date.
3. Map governance processes. Boards should be prepared to document how sustainability and climate risks factor into strategic and major transaction decisions — this is now an explicit disclosure requirement, not a narrative afterthought.
4. Plan for assurance. Even though external assurance isn’t required immediately, the two-year clock starts running from initial implementation, so early preparation avoids a scramble later.
5. Watch consolidated thresholds. Groups with multiple entities should assess revenue at the consolidated level to confirm which entities are actually in scope.

Key Takeaways

• The Philippines has shifted from voluntary “comply or explain” sustainability reporting to a mandatory, ISSB-aligned framework under SEC Memorandum Circular No. 16, Series of 2025.
• Coverage now extends beyond PLCs to include large non-listed entities.
• A three-tier phased rollout means the compliance clock starts at different times depending on market capitalization or revenue.
• Mandatory external assurance on Scope 1 and 2 emissions is a genuinely new obligation that didn’t exist under the 2019 guidelines.

This article is for general informational purposes only and does not constitute legal or financial advice. Companies should consult qualified legal and sustainability reporting professionals to assess their specific disclosure obligations under Philippine law.