Takeaways

• The Philippines is transitioning from a voluntary to a mandatory sustainability reporting framework aligned with global standards.
• The move to PFRS S1 and S2 strengthens investor confidence, enhances transparency, and positions Philippine businesses for long-term value creation.
• The new standards will be rolled out in phases starting January 2026, with assurance requirements to follow two years after each tier’s implementation.

Sustainability is no longer a side note in corporate strategy; it’s the story itself. In line with global efforts to standardize sustainability disclosures, the Philippine Securities and Exchange Commission (SEC) is making a decisive shift toward PFRS S1 and S2, marking a major step from its earlier “comply or explain” approach.

This pivot represents more than a regulatory update; it signals a transformation in how Philippine businesses measure performance, manage risk, and build trust in an increasingly sustainability-driven economy.

From Flexibility to Accountability

In 2019, the SEC issued Memorandum Circular No. 4, requiring publicly listed companies (PLCs) to submit sustainability reports following a flexible “comply or explain” format. While this served as an important starting point, the quality and consistency of disclosures varied significantly. Recognizing the need for stronger governance and comparability, the SEC has now moved to adopt PFRS S1 and S2, local versions of the IFRS S1 and S2 standards developed by the International Sustainability Standards Board (ISSB).

The ISSB, formed in 2021 by the IFRS Foundation, aims to create a global baseline for sustainability-related financial disclosures. While the IASB handles accounting standards, the ISSB’s role is to harmonize ESG reporting and connect sustainability information with financial reporting. The Philippines’ adoption of these standards reflects its commitment to global alignment and investor relevance.

Read More: Philippine SEC Unveils Bold Governance Reforms to Attract Global Investors

What’s Changing

The PFRS S1 and S2 framework will be rolled out in phases beginning January 1, 2026.

• Tier 1: Listed firms with a market capitalization above ₱50 billion will report for FY2026 (due in 2027).
• Tier 2: Firms with capitalization between ₱3 billion and ₱50 billion will report for FY2027 (due in 2028).
• Tier 3: Smaller listed firms and large non-listed entities (LNLs) with annual revenues over ₱15 billion will report for FY2028 (due in 2029).

Two years after each phase, companies will be required to provide limited assurance on their Scope 1 and 2 greenhouse gas (GHG) emissions, strengthening credibility and investor confidence.

A Strategic Shift Toward Transparency

The Philippine Sustainability Reporting Committee (PSRC), comprising representatives from the SEC, professional accounting bodies, and industry experts, has played a central role in preparing for this transition. By adopting these standards, the SEC is aligning with global investor expectations, enhancing data quality, and broadening coverage to include non-listed firms.

Businesses, in turn, must prepare to integrate financial materiality into sustainability reporting, strengthen data governance, and seek third-party assurance for emissions verification. The new framework also demands tighter coordination between sustainability and finance teams to ensure accurate and decision-useful disclosures.

Why It Matters

As Joel Carboni noted in Forbes, sustainability reporting exposes businesses to a deeper level of scrutiny than traditional financial reporting. The SEC’s pivot reinforces this reality: Sustainability performance is now a measure of business resilience, not just reputation.

Early adopters of PFRS S1 and S2 stand to benefit most by attracting capital, building trust, and future-proofing their operations. While investor-focused disclosures will remain the priority, companies can still use frameworks such as GRI, SASB, or Integrated Reporting to communicate broader ESG impacts to stakeholders.

Also Read: Sustainability Reporting Frameworks: GRI, Standards, and Trends

This transition is not merely about ticking boxes; it’s about redefining leadership and accountability in the modern business landscape. The SEC’s move to PFRS S1 and S2 is a call to action: For Philippine enterprises to rise, realign, and lead with purpose.

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Source: P&A Grant Thornton