New Guidelines Released for PFRS Sustainability Disclosures and Reporting Adoption

The Securities and Exchange Commission (SEC) has recently released Memorandum Circular No. 16, Series of 2025, entitled “Adoption of Philippines Financial Reporting Standards (PFRS) on Sustainability Disclosures and Issuance of Reporting Guidelines for Publicly Listed Entities and Largely Non-listed Entities”. This circular involves the approval of PFRS S1 and S2 during the Commission En Banc meeting held on 04 December 2025. PFRS S1 outlines the general requirements for disclosing sustainability-related financial information, while PFRS S2 focuses specifically on climate-related disclosures.

In accordance with this decision, the SEC has also introduced the Sustainability Reporting Guidelines along with a PFRS Adoption Roadmap to assist companies in implementing these standards in phases. These PFRS standards align with the International Sustainability Standards Board’s IFRS S1 and S2 and have been adapted for local use through the Philippine standard-setting process. The main objective of these guidelines is to improve transparency, comparability, and the usefulness of sustainability disclosures, with the ultimate goal of supporting long-term value creation and attracting investments with a focus on environmental, social, and governance (ESG) factors. This development reflects the SEC’s commitment to promoting good corporate governance, safeguarding investor interests, and ensuring that local reporting standards are in line with international practices within the Philippine capital market.

The circular outlines specific guidelines for the format and framework to be followed by publicly listed companies (PLCs) and large non-listed entities (LNLs) that fall under Section 17.2 of the Revised Securities Regulation Code. It mandates that these entities should submit their Sustainability Report as an attachment to their annual report. For LNLs not covered under this provision, they are required to submit their Sustainability Report along with their audited financial statements. Additionally, all PLCs and LNLs must obtain board approval for their Sustainability Reports prior to issuance.

The circular also introduces a phased approach for the adoption of PFRS S1 and S2, beginning in the fiscal year 2026. This approach includes market capitalization criteria for PLCs and annual revenue thresholds for LNLs, with tiered classifications based on these parameters. Companies are encouraged to start aligning their disclosures with PFRS S1 and S2 during the transition period leading up to the mandatory adoption.

Moreover, the circular mandates external assurance on Scope 1 and Scope 2 greenhouse gas (GHG) emissions, which will be required two years after an entity’s initial implementation of PFRS S1 and S2. This assurance engagement must be performed by an independent practitioner in accordance with the International Standard on Sustainability Assurance (ISSA) 5000, with a progression toward reasonable assurance over time. Companies are also encouraged to voluntarily seek reasonable assurance over their entire sustainability report.

In conclusion, the circular provides important guidance on sustainability reporting, external assurance, transition reliefs, exemptions, and compliance requirements. It aims to elevate the standard of reporting practices among Philippine entities, ensuring greater transparency, accountability, and alignment with international sustainability standards.