The Securities and Exchange Commission (SEC) is now requiring large non-listed entities (LNLs) to submit sustainability reports after issuing new rules that replaced a memorandum circular (MC) that previously covered only publicly listed companies (PLCs).

The SEC said it has adopted Philippine Financial Reporting Standards (PFRS) on sustainability disclosures to set clear guidelines that will help covered companies prepare and submit sustainability reports in line with international standards.

On Dec. 22, the Commission issued SEC MC No. 16, series of 2025, which provides for the adoption of PFRS on sustainability disclosures and the issuance of reporting guidelines for PLCs and LNLs.

The MC adopts PFRS S1 on the general requirements for disclosure of sustainability-related financial information and PFRS S2 on climate-related disclosures. It effectively repeals SEC MC 4, series of 2019, which required only PLCs to submit sustainability reports.

The PFRS on sustainability disclosures is aligned with International Financial Reporting Standards (IFRS) issued by the International Sustainability Standards Board (ISSB), which have been adopted by other Association of Southeast Asian Nations (ASEAN) capital markets such as Singapore, Thailand, Malaysia, and Indonesia.

“The adoption of the PFRS on sustainability disclosures underscores our commitment to high-quality, comparable, and globally aligned sustainability reporting,” SEC Chairperson Francis Lim said.

He added that, “By elevating the standards of sustainability reporting in the Philippines, we hope to enable more companies and stakeholders to better understand the financial impacts of sustainability-related risks and opportunities, supporting long-term value creation and improved capital allocation decisions.”

Under the new MC, PLCs and LNLs that fall under Section 17.2 of Republic Act (RA) No. 8799, or the Securities Regulation Code (SRC), are required to submit their sustainability reports—reviewed and approved by the board of directors—as an attachment to their annual report.

LNLs that are not covered by the provision shall submit sustainability reports together with their audited financial statements (FS).

The mandatory adoption of PFRS S1 and PFRS S2 will be implemented using a tiered approach beginning in fiscal year (FY) 2026.

Tier one covers PLCs with a market capitalization of more than ₱50 billion as of Dec. 31, 2025, or as of the date of their listing after the same date, with reporting starting in 2027 covering FY 2026.

Meanwhile, tier two involves PLCs with a market capitalization of more than ₱3 billion up to ₱50 billion as of Dec. 31, 2025, or upon their listing after the same period. Covered companies are required to adopt PFRS for their sustainability reports for the FY beginning on or after Jan. 1, 2027, with reporting due in 2028.

Adoption of PFRS will begin in 2028 for tier three, covering the FY beginning on or after Jan. 1, 2028.

This applies to PLCs listed on the Philippine Stock Exchange (PSE) with a market capitalization of ₱3 billion or less as of Dec. 31, 2025, or as of the date of their listing after the same date, as well as PLCs with debt securities listed solely on Philippine Dealing & Exchange Corp. (PDEx) and with no equity securities listed on the PSE.

Tier three also covers LNLs with annual revenue of more than ₱15 billion for the immediately preceding FY, with revenue generated from their ordinary activities, as defined under the applicable PFRS accounting standards.

For parent firms, the threshold shall be based on consolidated or group-level revenues. Otherwise, it shall be based on company-level revenues.

The rules also allow covered companies to adopt other international frameworks in addition to PFRS S1 and S2, provided these do not conflict with PFRS S1 and S2, obscure material information, and are properly disclosed.

They also implement a mandatory limited assurance on scope one and two greenhouse gas (GHG) emissions by an independent assurance practitioner two years after the implementation of PFRS S1 and S2 for each tier, in line with the International Standard on Sustainability Assurance (ISSA) 5000, to ensure consistent and high-quality sustainability assurance engagements.

The SEC provided transitional relief under the MC to address challenges identified by stakeholders during the public consultation process.

MC 4 will remain in force until a PLC reaches its adoption year, while companies may continue using any recognized framework for submitting sustainability reports for FY 2025.

Companies under tiers one and two are allowed to disclose information on climate-related risks and opportunities only for one year, while tier three companies will be given two years.

All covered corporations will be given one year to submit their sustainability report after the publication of their related FS—at the same time as their next second-quarter or half-year interim FS, or within nine months from the end of the reporting period if no interim FS are issued.

All tiers will also not be required to disclose comparative information and will be allowed to use methods other than the GHG protocol: a corporate accounting and reporting standard for one year. Covered corporations will not be required to submit scope three GHG emissions for two years.