Sustainability reporting in the Philippines has moved from a voluntary practice to a mandatory one. Under SEC Memorandum Circular No. 16, Series of 2025, the Securities and Exchange Commission has adopted the Philippine Financial Reporting Standards on Sustainability Disclosures, known as PFRS S1 and PFRS S2, for publicly listed companies and large non-listed entities. The circular repeals the SEC's 2019 sustainability reporting guidelines and replaces them with a framework aligned to the International Sustainability Standards Board.
For boards and finance leaders, the practical question is no longer whether to prepare. It is when your organization's clock starts, and what needs to be in place before it does.
What PFRS S1 and S2 Actually Require
PFRS S1 sets the general requirements for disclosing sustainability-related financial information. PFRS S2 addresses climate-related risks and opportunities specifically. Together, they require covered entities to report against four pillars that will be familiar to anyone who has followed global ISSB adoption: Governance, Strategy, Risk Management, and Metrics and Targets.
This is not a checklist exercise. Governance disclosures require naming the board committee or individual accountable for sustainability oversight. Strategy disclosures require showing how sustainability risks and opportunities factor into business planning. Risk Management disclosures require documenting the process, not just the outcome. Metrics and Targets close the loop with the actual numbers a company is tracking and held to.
The Rollout Is Tiered, Not Uniform
This is the detail most conversations about the circular tend to flatten, and it is the one that matters most for planning purposes. Adoption does not happen on a single date for every covered entity. It follows three tiers, based on market capitalization and revenue as of December 31, 2025.
Tier 1
Covers publicly listed companies with market capitalization above roughly PHP 50 billion. These companies begin adopting the standards in fiscal year 2026, with their first sustainability reports due in 2027.
Tier 2
Covers listed companies with market capitalization between roughly PHP 3 billion and PHP 50 billion. Adoption begins for fiscal year 2027, with reporting due in 2028.
Tier 3
Covers smaller listed companies at or below roughly PHP 3 billion in market capitalization, companies with debt securities listed solely on the Philippine Dealing and Exchange Corp, and large non-listed entities with annual revenue above PHP 15 billion. Adoption for this group begins in fiscal year 2028.
A company's size and structure, not its industry or ambition, determines its starting line. Getting this wrong, in either direction, wastes either time or runway. What does not change by tier is the substance of the disclosure itself. Every company, regardless of when its clock starts, will eventually report against the same four pillars: who governs sustainability at board level, how it factors into strategy, how the risk is managed, and which metrics and targets are being tracked.
Built-In Transition Reliefs
Tier 1 and Tier 2 companies are permitted a one-year window in which they may disclose only climate-related risks and opportunities before the broader sustainability disclosures are required. Tier 3 companies receive a two-year window on the same basis. Scope 3 emissions and certain comparative data also carry temporary exemptions during the early adoption years.
Large non-listed entities have an additional option. If a parent company already publishes a sustainability report under an equivalent framework that covers the entity's own disclosures, that entity may apply for exemption by submitting a Certificate of Exemption from Mandatory Sustainability Reporting alongside its annual financial statements.
These reliefs exist because Governance and Strategy disclosures take longer to build credibly than a single reporting cycle allows. A board committee cannot be assigned sustainability oversight the same year it is expected to report on how that oversight shaped strategy. The staggered climate-only window is, in effect, the SEC giving companies time to make the Governance and Strategy pillars real before holding them to the full standard.
Assurance Follows Two Years Later
Reporting is only the first obligation. Two years after a tier's initial adoption, covered entities must obtain mandatory external limited assurance over their Scope 1 and Scope 2 greenhouse gas emissions, performed by a Certified Public Accountant or another qualified practitioner. Over time, the SEC has signaled a shift from limited assurance toward reasonable assurance, which is a materially higher bar.
This means the true compliance timeline for any tier is longer than the reporting date alone suggests. A Tier 1 company reporting for the first time in 2027 should already be planning for an assurance engagement in 2029, and the data infrastructure that assurance requires does not get built retroactively.
Assurance is really a test of two of the four pillars at once. Risk Management is tested because an assurance practitioner is verifying that the process behind the numbers, not just the numbers, holds up. Metrics and Targets are tested directly, since Scope 1 and 2 emissions are exactly the kind of metric the standard requires companies to track and report. A company that has not treated Risk Management and Metrics and Targets as live disclosures well before its assurance year will not close that gap in a single audit cycle.
The Cost of Getting This Wrong
Noncompliance is not a paperwork matter. Publicly listed companies that fail to submit a sustainability report, or that submit one that does not meet PFRS S1 and S2 requirements, face the same penalty treatment as an incomplete annual report. Under the new circular, this is treated as a fresh offense count, separate from any prior noncompliance under the old 2019 guidelines. Penalties for large non-listed entities will be defined through subsequent SEC issuances.
Why the Timing Matters Beyond the Philippines
The country is not moving in isolation. These standards align with the ISSB framework already adopted, in some form, by Singapore, Thailand, Malaysia, and Indonesia. For companies with regional operations, investors, or supply chain partners, PFRS S1 and S2 compliance is increasingly a baseline expectation rather than a local requirement to be handled separately from everything else.
Investor and lender assessments increasingly factor in the credibility of a company's sustainability disclosures, which means this compliance work is also, quietly, a cost of capital consideration.
Where to Start, Regardless of Tier
The tier determines the deadline. It does not determine when preparation should begin. A Tier 2 or Tier 3 company can, and should, start building all four pillars well before its formal adoption year:
Governance
by naming who at board level owns this
Strategy
by documenting how sustainability already factors, or should factor, into planning
Risk Management
by putting a process in place rather than waiting to backfill one
Metrics and Targets
by starting to collect the data now, since the numbers required at reporting time cannot be reconstructed retroactively
Companies that wait until the year before their deadline will find that all four pillars demand more groundwork than expected, particularly the first time through.
If your organization has not yet confirmed which tier applies to it, that is the first conversation to have, and the one every subsequent decision depends on.
Prepare for PFRS S1 and S2 adoption.
Build the governance and data processes sustainability reporting requires.
Downloadable PDF & Reference Source
SEC Memorandum Circular No. 16, Series of 2025
Adoption of Philippines Financial Reporting Standards (PFRS) on Sustainability Disclosures and Issuance of Reporting Guidelines for Publicly Listed Entities and Largely Non-listed Entities.
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