With PFRS, sustainability disclosures can become a competitive edge

Adopting PFRS on Sustainability Disclosures allows companies to shift sustainability from a mere compliance requirement to a fundamental part of their corporate strategy, ultimately driving long-term value and resilience in an increasingly unpredictable environment.

- CRYSTAL ALELI CORNELL, JOYCE ANNE SORIANO and ZOE AURORA ROMERO

In today’s fast-changing business environment, the demand for consistent, comparable, and transparent sustainability reporting is crucial for investment decisions. The International Sustainability Standards Board (ISSB) has introduced IFRS S1 General Requirements for Sustainability-related Financial Information and S2 Climate-related Disclosures, which provide crucial sustainability-related information alongside financial statements, catering to investor demands for transparency.

These standards offer businesses a chance to enhance corporate governance and investor protection through globally aligned regulations.

Following the adoption of IFRS S1 and S2, on Dee. 22, the Securities and Exchange Commission (SEC) issued Memorandum Circular No. 16, Series of 2025 requiring publicly-listed companies (PLCs) and large non-listed companies (LNLs) to adopt Philippine Financial Reporting Standards (PFRS) on Sustainability Disclosures starting in FY2026 with limited extensions of transition reliefs under a tiered approach.

Mandatory external limited assurance of Scope land Scope 2 Greenhouse Gas (GHG) emissions by an independent assurance practitioner will also be required two years after the initial implementation of these standards for each tier.

The standards focus on four core areas:

Governance: governance processes, controls and procedures a reporting entity uses to monitor, manage and oversee sustainabilityand climate-related risks and opportunities

Strategy: approach the entity uses to manage sustainabilityand climate-related risks and opportunities

Risk Management: processes the entity uses to identify, assess, prioritize and monitor sustainabilityand climate-related risks and opportunities

Metrics and Targets: information used to manage and monitor the entity’s performance in relation to sustainabilityand climate-related risks and opportunities over time