The Securities and Exchange Commission (SEC) has unveiled a proposal to broaden sustainability reporting requirements by including large nonlisted entities (LNLs) alongside publicly listed companies (PLCs). On July 30, the SEC issued a draft memorandum circular (MC) inviting public feedback on guidelines and a roadmap for implementing Philippine Financial Reporting Standards (PFRS) related to sustainability disclosures.

Stakeholders are invited to submit comments on the draft MC by August 15. Currently, all PLCs are mandated to file annual sustainability reports under SEC Memorandum Circular No. 4, issued in 2019.

According to the SEC, this initiative aims to institutionalize sustainability reporting, enhance environmental, social, and governance (ESG) accountability, and improve the quality and comparability of non-financial disclosures across companies in the Philippines. The new framework also seeks to align disclosures with international standards, thereby attracting ESG-focused investors to the Philippine capital markets.

Under the proposed regulations, starting in 2026, entities will be required to adhere to PFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and PFRS S2 (Climate-related Disclosures). Implementation will occur in phases based on market capitalization for PLCs and annual revenue for LNLs:

• Tier 1: PLCs with market capitalization over ₱50 billion as of December 31, 2025, must begin reporting in 2027.
• Tier 2: PLCs with market capitalization between ₱3 billion and ₱50 billion as of December 31, 2026, begin reporting in 2028.
• Tier 3: PLCs with market capitalization of ₱3 billion or less as of December 31, 2027, and LNLs with annual revenue exceeding ₱15 billion in the preceding fiscal year, start reporting in 2029.

The draft MC also outlines transitional measures and the phased introduction of mandatory limited assurance for Scope 1 and 2 greenhouse gas emissions reporting.

The SEC emphasized that the draft MC applies solely to entities regulated under its jurisdiction as defined by the Revised Corporation Code. The design of the phased implementation was informed by a national survey assessing market readiness and tier segmentation.

Exemptions are available for LNLs whose immediate, intermediate, or ultimate parent companies already prepare the required sustainability disclosures within the Philippines, provided these are included in the parent company’s reports.

Economist Robert Dan J. Roces of SM Investments Corp. noted that the draft MC expands the scope of sustainability reporting to encompass significant nonlisted firms long exempt from such formal disclosures. He added, "The phased rollout and gradual assurance requirement reflect a mature regulatory touch, and may help position the Philippines as a regional leader in transparency while meeting investor demand for fuller ESG data."

However, Roces also cautioned about potential compliance difficulties for firms lacking resources or established reporting frameworks, stating, "Success will depend less on intent than on clear rules, strong guidance, as well as enforcement."

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort commented that the draft MC could improve companies’ attractiveness to both domestic and international investors. "Global and local regulators encourage investors to patronize companies and governments that comply with ESG standards as compliance with ESG standards signals good business practices," he said.

The SEC continues to welcome input from interested parties as it refines its approach to embedding sustainability within business reporting standards across the Philippines.