AS the world marks Earth Month, the Philippines is entering a transformative chapter in its sustainability journey, one that moves the conversation beyond awareness and advocacy toward accountability, action and measurable impact.
With the issuance of the Securities and Exchange Commission’s (SEC) Memorandum Circular (MC) 16, Series of 2025, the country formally adopts the Philippine Financial Reporting Standards (PFRS) on Sustainability Disclosures — a decisive shift toward globally aligned, investor-relevant sustainability reporting. The circular introduces PFRS S1 (General sustainability-related disclosures) and PFRS S2 (Climate-related disclosures), reinforcing the country’s commitment to transparency, enhanced decision-making, useful information and stronger corporate governance.
This development is timely. Earth Month has traditionally been a moment for reflection on climate, communities and collective responsibility. But this year, it is also a call to elevate sustainability from aspiration to execution. The SEC’s move makes clear that sustainability is no longer just about programs and pledges; it is about how organizations explain their long-term prospects, manage risk and create value in a changing world.
More than regulatory housekeeping, it marks a structural shift in how Philippine companies will communicate resilience, strategy and performance, recognizing that sustainability is inseparable from financial stability, access to capital and economic resilience.
Adoption of PFRS S1 and S2 replaces the earlier, narrower framework under MC 4 (2019), which covered only publicly listed companies. The new requirements apply more broadly, ensuring that both listed and large non-listed companies submit sustainability reports reviewed and approved by their boards. These must accompany annual reports or audited financial statements.
The SEC complements these standards with the national sustainability reporting adoption roadmap, outlining a phased, tiered approach to full implementation beginning this fiscal year.
PFRS S1 and S2 compel businesses to articulate how sustainability and climate factors affect their governance, strategy, business models, risk management and performance metrics, ensuring sustainability is integrated into real business thinking, not merely treated as CSR or compliance.
This is a significant shift. As several Asean peers have begun integrating globally aligned disclosures into their reporting regimes, the Philippines is moving to ensure its capital market remains competitive and credible.
With requirements extended to large non-listed companies, sustainability reporting becomes an economy-wide expectation. This signals that resilience, transparency and long-term value creation are not just the domain of listed companies but are fundamentals of good business in the Philippines.
The move mirrors a broader global trend where sustainability information is becoming as important as financial data. The ISSB standards aim to reduce greenwashing and create a common global language for sustainability reporting.
Across markets, investors want clearer visibility of sustainability-related risks and opportunities that could influence future cash flows. SEC Chairman Francis Lim has said that heightened transparency will help stakeholders better understand the financial impacts of climate-related and sustainability related risks, ultimately improving resource allocation and supporting long-term value creation.
Grant Thornton International’s “Scaling Sustainability” research reinforces the trend: 85.9 percent of firms globally said they would maintain or increase sustainability investment in 2025, and 72.9 percent would continue sustainability reporting, even amid global regulatory rollbacks, because they view sustainability as a strategic enabler, not a compliance cost.
With mandatory reporting beginning for many covered companies, preparations must begin now. Covered entities should treat 2026 as the foundation year where they establish the systems, controls and data baselines needed.
Even professional services firms are modeling this shift. P&A Grant Thornton recently released its inaugural Sustainability Report in 2025, signaling a move from compliance-driven operations to purpose-led ESG leadership.
Below are practical, actionable preparations companies can undertake to ensure the completeness, accuracy and audit readiness of their first PFRS S1/S2-aligned sustainability report.
– Conduct a comprehensive gap analysis. Companies must understand their current position across governance, existing sustainability strategy, data quality and internal processes. A gap analysis helps identify where work is needed to meet PFRS S1 and S2 requirements.
Entities may seek advisory support to conduct this, especially in complex data areas such as GHG emissions or climate-related scenario analysis.
– Develop a sustainability roadmap. A sustainability roadmap should outline the steps needed to close identified gaps, define roles and responsibilities, set internal timelines and create budgets.
It should also specify key milestones leading to the first PFRS-aligned report, including internal testing cycles, mock reporting runs and board review timelines.
Advisory assistance may again be helpful.
– Strengthen data quality and internal controls. High-quality sustainability reporting depends on reliable data, consistent methodologies and strong internal controls. Entities should examine whether current systems enable accurate tracking of sustainability-related data, especially GHG emissions, energy use and climate-related financial impacts.
If gaps exist, entities may need help establishing new controls, improving data governance, or implementing software systems designed for sustainability data management. This also prepares companies for the upcoming limited assurance requirement, which will require traceability, documentation and audit-ready data.
– Know the standards. Insufficient understanding of PFRS S1 and S2 may result in incomplete or overly lengthy reports, duplication of information, or unintentional noncompliance.
Companies should ensure key personnel are trained in PFRS S1 and S2 requirements, materiality assessments, climate scenario analysis and ISSB interoperability and global alignment. Expertise will also enable internal teams to collaborate effectively with assurance providers, auditors, or advisors.
– Set the tone at the top. Sustainability reporting is not owned solely by sustainability or finance teams; it requires participation across the organization. Leadership plays a central role in setting expectations, allocating resources and ensuring sustainability is embedded across operations, risk management and strategy. These directly support the foundational preparations already outlined.
These steps, taken early in 2026, will allow companies to enter the first reporting cycle not with uncertainty or pressure, but with confidence, clarity and readiness.
Under the SEC circular, sustainability reporting will not stop at disclosure. Mandatory limited assurance over Scope 1 and Scope 2 GHG emissions will be required two years after initial implementation, performed by an independent assurance practitioner.
This move echoes global developments: sustainability disclosures are increasingly expected to be “investor grade,” and assurance establishes credibility by ensuring sustainability data meets governance and control standards comparable to financial reporting.
ESG reports of several member firms within the Grant Thornton network show this in practice. In their 2024 reports, these firms obtained third-party limited assurance over 2023 and 2024 GHG emissions inventories, demonstrating how credible assurance builds trust and improves data quality.
MC 16 marks more than a regulatory milestone in Philippine corporate governance, it signals the end of the era when sustainability reporting resembled traditional CSR narratives and the beginning of a more rigorous, investor-relevant and globally aligned disclosure regime.
This transformation is cultural as much as it is technical. Sustainability is no longer a glossy appendix or an annual CSR highlight reel. It is now embedded in how organizations articulate their long-term strategy, manage enterprise-wide risks, oversee governance and demonstrate accountability.
And as the Philippines embraces this new era, Earth Month becomes more than a time for reflection, it becomes a reminder that sustainability, when done right, shapes how businesses endure, compete and create long-term value.
Yusoph Maute is a partner for the audit and assurance practice area at P&A Grant Thornton.