I’ve always believed that real change begins with a starting point—and every now and then, we need to make a purposeful pivot. Sustainability has emerged as one such pivot, a defining force in how businesses shape their future—no longer peripheral, but integral to strategy, resilience, and value creation.
In response to the growing demand for consistent, investor-relevant sustainability disclosures, the IFRS Foundation established the International Sustainability Standards Board (ISSB) in November 2021 during COP26 in Glasgow. The ISSB was created as a sister board to the International Accounting Standards Board (IASB), which has long been responsible for developing IFRS Accounting Standards. While the IASB focuses on financial reporting, the ISSB was formed to harmonise the fragmented ESG reporting landscape and provide a global baseline for sustainability-related financial information. This structure ensures connectivity between financial and sustainability disclosures—enabling better decision-making and long-term value creation.
In the Philippines, this shift is accelerating as the Securities and Exchange Commission (SEC) moves from its 2019 "Comply or Explain" approach (SEC MC No. 4-2019) to a mandatory sustainability reporting framework aligned with global standards: PFRS S1 and S2.
This transition marks a pivotal moment. It reflects a deeper understanding that sustainability reporting is not just about compliance—it’s about building trust, managing risk, and unlocking long-term value.
Why the Shift?
The 2019 circular was a starting point. It required publicly listed companies (PLCs) to submit sustainability reports using the SEC’s prescribed template, following a “comply or explain” approach—where companies had to either provide ESG disclosures or explain any omissions. While flexibility was allowed in the level of detail, submission itself was mandatory and subject to penalties for non-compliance. But uptake was limited, and the quality of disclosures varied widely. The SEC recognised that to drive meaningful change, a stronger, more consistent framework was needed.
Enter PFRS S1 and S2—local adaptations of the International Sustainability Standards Board’s (ISSB) IFRS S1 and S2. These standards provide a unified structure for sustainability-related financial disclosures and climate-related risks and opportunities. The Philippine Sustainability Reporting Committee (PSRC), composed of representatives from the SEC, accounting bodies, and industry experts, played a pivotal role in leading the preparation and groundwork for the adoption of these standards. Thanks to their leadership, the Philippines is now aligned with global best practices.
By adopting these standards, the SEC is aligning with global investor expectations, expanding coverage to include large non-listed entities (LNLs), introducing assurance mechanisms to strengthen credibility, and responding to climate and social pressures with urgency. This is not just a regulatory upgrade—it’s a strategic repositioning of Philippine business toward transparency, resilience, and purpose.
What Businesses Must Prepare For
Companies must emphasise financial materiality and investor relevance in disclosures, moving beyond stakeholder-centric narratives. The new reporting structure requires upgraded systems, financial process integration, and enhanced data governance. To ensure compliance and credibility, companies will need third-party assurance providers to validate Scope 1 and 2 emissions, particularly for audits and readiness assessments. Internal teams must also be trained on the new standards, which will require strategic planning and executive involvement to ensure a smooth and effective transition.
What’s Changing?
Starting January 1, 2026, the SEC will implement a phased rollout. Tier 1 will include listed firms with market capitalisation above ₱50 billion, which will report for FY2026 (due in 2027). Tier 2 will cover listed firms with market capitalisation between ₱3 billion and ₱50 billion, reporting for FY2027 (due in 2028). Tier 3 will consist of smaller listed firms and large non-listed entities (LNLs) with annual revenues over ₱15 billion, reporting for FY2028 (due in 2029). Two years after each tier’s adoption, limited assurance on Scope 1 and 2 greenhouse gas emissions will be required.
Why It Matters
In a Forbes article titled “What Keeps Executives Up At Night: The Hidden Pressures of Sustainability Reporting”, Joel Carboni highlighted the depth of disclosure required from these sustainability reports, exposing businesses to scrutiny that goes beyond traditional financial reporting. This further underscores the need for robust governance and accurate reporting—not just for the sake of compliance and brand reputation, but to build trust, manage risks, and create long-term value.
This shift will ripple across the entire corporate ecosystem—from large enterprises to SMEs in the supply chain. It raises expectations for governance, transparency, and ESG integration. Businesses that embrace this change early will be better positioned to attract capital, build stakeholder trust, and future-proof their operations. As Joel Carboni noted in Forbes, sustainability reporting exposes businesses to scrutiny that goes beyond traditional financial metrics. It demands robust governance, accurate data, and a clear sense of purpose.
While PFRS S1 and S2 are designed primarily for investor-focused disclosures, companies may still use other frameworks—such as GRI, SASB, or Integrated Reporting—for communicating with broader stakeholder groups, including customers, employees, regulators, and communities. This allows businesses to maintain a comprehensive ESG narrative that meets both regulatory and stakeholder expectations.
Walking the Talk
At P&A Grant Thornton, we’re not just advising clients—we’re living the transition. Our Internal Sustainability Unit recently released our first sustainability report: From Plan to Action: Our Shared Journey towards a Sustainable Impact. It reflects our commitment to integrating ESG across all areas of the Firm and setting measurable goals for the future.
We’re also preparing a white paper titled Scaling Sustainability: How the Mid-Market is Future-Proofing Growth, which explores how Filipino businesses are responding to this shift with innovation and resilience.
Final Thought
This is more than a pivot—it’s a redefinition of what it means to lead, grow, and create impact. The SEC’s move to PFRS S1 and S2 is a call to action for Philippine businesses to rise to the challenge.
The question is no longer if we should embrace sustainability. It’s how we lead the way.
As published in The Manila Times, dated 12 November 2025
