SEC Adopts Revised Sustainability Reporting Requirements; Large Non-Listed Entities Now Covered

The Philippine Securities and Exchange Commission (“SEC”) issued Memorandum Circular No. 16, series of 2025 (“SEC MC No. 16-2025”), which took effect on 8 January 2026. It replaces SEC Memorandum Circular No. 4, series of 2019 (“SEC MC No. 4-2019”), which previously governed the sustainability reporting obligations of publicly listed companies (“PLCs”).

Uniform Framework

Unlike SEC MC No. 4-2019 (which allowed reporting companies to prepare sustainability reports based on any internationally recognized framework or standard or a combination thereof), SEC MC No. 16-2025 prescribes the use of PFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and PFRS S2 (Climate-related Disclosures). PFRS S1 and PFRS S2 are based on the International Financial Reporting Standards (IFRS) S1 and S2 issued by the International Sustainability Standards Board. 

Expanded Coverage

While the reporting obligation under SEC MC No. 4-2019 covered PLCs only, SEC MC No. 16-2025 extends the reporting obligation to large non-listed entities (“LNLs”). LNLs are companies with annual revenue of more than PHP15 billion.¹

External Assurance

SEC MC No. 4-2019 did not require external assurance for sustainability reports. In contrast, SEC MC No. 16-2025 imposes mandatory external limited assurance for Scope 1 and 2 Greenhouse Gas (“GHG”) emissions, to be conducted by an independent assurance practitioner (i.e., Certified Public Accountant or qualified non-accountant). The requirement will apply two (2) years after the reporting company’s initial implementation of PFRS S1 and PFRS S2. The requirement will progress toward reasonable assurance over time. Companies are also encouraged to obtain reasonable assurance over their full sustainability report. Additional rules and guidelines on external assurance will be issued by the SEC.

Implementation Timeline

SEC MC No. 16-2025 adopts a phased implementation approach. Covered companies shall start adopting PFRS S1 and PFRS S2 beginning in 2026, 2027 or 2028, depending on their classification as follows:

Transition Reliefs & Exemptions

SEC MC No. 16-2025 provides specific transition reliefs and exemptions to facilitate a phased and practical implementation of PFRS S1 and PFRS S2. Transition reliefs relate to requirements pertaining to S1 disclosures (otherwise known as the “climate-first” approach), timing of submissions, disclosure of comparative information, the use of the GHG Protocol, and disclosure of Scope 3 GHG emissions. On the other hand, LNLs may be exempt from submitting a Sustainability Report if the parent company complies with the guidelines in its own jurisdiction.

Compliance & Penalties

For PLCs, non-attachment of the Sustainability Report to the annual report and non-compliance with PFRS S1 and PFRS S2 shall be subject to the penalties provided under applicable SEC rules. For LNLs, penalties will be imposed in accordance with future SEC issuances. Future SEC Issuances

The SEC will issue subsequent guidance materials to assist covered entities in the effective implementation of the memorandum circular. Thus, entities that are covered or potentially covered by the memorandum circular should stay tuned for future developments.

Footnotes

1. LNLs are covered by the reporting requirement if annual revenue meets the PHP 15 billion threshold for the fiscal year (“FY”) ending on or after 31 December 2027. Companies that do not meet the revenue threshold in that FY shall continue to be evaluated in each succeeding FY thereafter to determine if they subsequently qualify as LNLs. 

2. “Market capitalization” refers to the market value of a PLC’s outstanding equity securities, calculated as the total number of outstanding shares multiplied by their respective closing or last traded prices as of 31 December 2025, regardless of the end of the FY. For companies listed in the PSE after 31 December 2025, the market capitalization shall be based on the price on the date of listing.

3. “Revenue” is income arising in the course of an entity’s ordinary activities, as defined by applicable PFRS Accounting Standards. The threshold shall be based on the consolidated or group-level revenues if the company is a parent; otherwise, it shall be at the company-level.