The Philippine Securities and Exchange Commission has adopted Philippine Financial Reporting Standards S1 and S2 for sustainability disclosures by covered publicly listed companies and large non-listed entities.
SEC Memorandum Circular No. 16, Series of 2025, took effect in January 2026 and phases mandatory reporting by company type and size. It replaces a one-size-fits-all start date with three tiers and provides transition relief for first-time reporters.
The three adoption tiers
The roadmap uses market capitalisation and entity type to set the first mandatory year.
Tier 1 covers companies listed on the Philippine Stock Exchange with market capitalisation above PHP50 billion. Mandatory adoption begins for fiscal years starting on or after January 1, 2026, with the report filed in 2027.
Tier 2 covers PSE-listed companies with market capitalisation above PHP3 billion and up to PHP50 billion. Mandatory adoption begins for fiscal years starting on or after January 1, 2027, with reporting in 2028.
Tier 3 includes PSE-listed companies with market capitalisation of PHP3 billion or less, companies with debt securities listed on the Philippine Dealing and Exchange Corporation but no PSE-listed equity, and large non-listed entities with annual revenue above PHP15 billion. Adoption begins for fiscal years starting on or after January 1, 2028, with reporting in 2029.
The Circular contains definitions, calculation provisions, and exemptions that matter to classification. Preserve the market-capitalisation calculation, listing evidence, revenue analysis, group structure, and exemption conclusion used for each reporting entity.
PFRS S1 and PFRS S2 follow the ISSB baseline
PFRS S1 covers material sustainability-related risks and opportunities. PFRS S2 focuses on climate. Both connect sustainability information to financial reporting and organise disclosures around governance, strategy, risk management, and metrics and targets.
A covered company should map every disclosure to an owner, evidence source, review control, and reporting location. Use the IFRS S1 and IFRS S2 framework to understand the architecture, then apply the Philippine standards and SEC Circular for local compliance.
Large non-listed subsidiaries should also test the Circular’s parent-report exemption conditions. Record the parent, reporting framework, consolidation treatment, public availability, and any local filing still required.
Transition relief changes by tier
The Circular provides climate-first relief: Tier 1 and Tier 2 companies receive one year, while Tier 3 companies receive two years. It also includes transition relief for comparatives, reporting timing, selected GHG methodology, and Scope 3 disclosure.
Relief should appear in the project plan as a controlled dependency. For every item, record the legal basis, years available, approval, disclosure wording, and date the full capability must begin. Do not assume that relief from one item postpones the entire sustainability report.
Companies not yet in their mandatory year must continue to follow the reporting guidance that remains applicable during the transition.
Limited assurance follows the first reporting year
The roadmap requires limited assurance over Scope 1 and Scope 2 emissions two years after a tier’s initial implementation. The Circular points to sustainability assurance under ISSA 5000.
This sequence gives companies one reporting cycle to learn, but not one cycle to ignore controls. Year-one boundaries, methods, source populations, and estimates become the baseline an assurance provider will examine later.
Run an ISSA 5000 assurance-readiness assessment before the first mandatory close. Test whether evidence is retained, calculations can be reproduced, approvals are visible, and narrative statements have support.
A tier-independent implementation plan
- Confirm tier, reporting entity, fiscal year, and any exemption.
- Approve a PFRS S1/S2 gap assessment and transition-relief register.
- Reconcile the GHG boundary to the financial reporting group.
- Build complete Scope 1 and Scope 2 source populations and factor controls.
- Screen Scope 3 categories and create a material data-improvement roadmap.
- Connect sustainability risks to strategy, risk management, and financial planning.
- Run a dry report with board review before the mandatory year.
- Work backward from the limited-assurance date when designing evidence controls.
Board review and approval should be built into the production calendar, not added after the report has been written.
Information in this article was verified on August 9, 2026. Philippine SEC requirements are detailed and may be amended. This overview is general information, not legal advice.
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