Making Sense of the Alphabet Soup: A Briefer on Sustainability Reporting in the Philippines

Across the world, and in the Philippines, corporate sustainability reporting is no longer only a “nice-to-have” but a “must address”. In the Philippines, a growing mix of investor demands, government regulations, and stakeholder expectations is pushing companies to formally disclose their sustainability performance. 

These pressures and mandates reflect the key impacts shown below:

Together, these drive the sustainability disclosure landscape in the Philippines from one that’s now transitioning from voluntary and template-based to one that’s mandatory and standards-aligned.

Sustainability Reporting Landscape: Understanding the Alphabet Soup

A good starting point is to clear up the common confusion: What’s the difference between sustainability reporting and ESG reporting?

In simple terms, sustainability reporting is the broader concept. It includes any kind of reporting about an organization's impact on the environment, society, and the economy. This is the term more commonly used in the Philippines.

ESG reporting, which stands for Environmental, Social, and Governance, is a more specific type of sustainability reporting. It focuses on the sustainability topics that are most relevant to investors and financial markets, such as climate risks, labor practices, or business ethics that could affect a company’s performance or value. ESG can be thought of as being part of sustainability reporting, with a stronger focus on how sustainability affects a company’s financial future. In practice, the two terms are often used interchangeably, but the difference lies in the intended audience:

• Sustainability reports: written for a wide range of stakeholders such as employees, communities, regulators, etc.

• ESG reports: usually tailored for investors, lenders, and rating agencies

This article mainly tackles sustainability reporting. Now that we’ve clarified that ESG is a focused part of the broader sustainability reporting umbrella, the next question is:

How do companies actually know what to report, how to report it, and who evaluates?

This is where the alphabet soup of sustainability reporting begins. These can be overwhelming at first, but they each serve a specific purpose in the reporting ecosystem. To make sense of it all, it helps to define and give examples for the ff.:

• Reporting standards define what topics and metrics companies are expected to disclose, such as greenhouse gas emissions or supply chain impacts.

• Frameworks guide how the information is structured, focusing on principles, themes, or narrative coherence.

For example, TCFD’s four-pillar approach (Governance, Strategy, Risk Management, and Metrics & Targets) helps organizations frame their climate disclosures around financial risk and resilience.

• Rankers and raters are external evaluators who assess how well companies perform on sustainability issues.

Their ratings influence investor decisions, lending conditions, and even public image.

While these tools are global, Philippine regulators have localized their use to suit the national context. This will be discussed more in the next section. Understanding the difference between standards, frameworks, and raters gives us the basic tools to navigate sustainability reporting, but why do all of these tools exist? And how did we get to the current set of rules that companies in the Philippines are expected to follow?

Timeline: Evolution of Sustainability Reporting Standards

To answer these questions, we need to look at the evolution of sustainability reporting, which is a journey that spans decades of global climate action, voluntary guidelines, and eventually, formal regulations. The next few figures walk through key milestones that shaped this space, both globally (in blue) and in the Philippine context (in green).

Over the years, many different standards and frameworks emerged, each with its own strengths and focus. This created confusion for companies trying to report effectively and consistently. 

In response, the global community called to simplify and consolidate these tools into one clear, investor-focused standard. That led to the creation of the International Sustainability Standards Board (ISSB) in 2021, which brought together widely used approaches like TCFD’s risk-focused structure and SASB’s industry-specific metrics into what we now know as IFRS S1 and S2. 

For the Philippines, this is important context as the local version of IFRS S1 and S2 -> PFRS S1 and S2 isn’t just a new set of rules out of nowhere. These standards are built on frameworks that many companies have already encountered through SEC Memorandum Circular No. 4 of 2019, such as GRI (which remains a separate but complementary framework focused on broad stakeholder reporting), SASB, and TCFD, or through previous voluntary reporting before 2019. 

By understanding the building block frameworks and standards of IFRS S1 and S2, companies can recognize continuity between past and future reporting requirements, build on existing disclosures rather than start from scratch, and write more future-ready reports that align with both local expectations and international best practices. 

Sustainability Reporting in the Philippines

As seen in the timeline, sustainability reporting in the Philippines has gone through two major regulatory phases. The first phase began in 2019 with the issuance of SEC MC No. 4, which laid the foundation for formal ESG disclosures among publicly listed companies (PLCs). 

This circular introduced a reporting template grounded in internationally recognized frameworks like GRI, TCFD, SASB, and IIRC. This flexible approach reflected the maturity of the local reporting environment at the time. It prioritized awareness and capacity-building, helping companies get used to the practice of disclosing non-financial performance. Over the years, this helped familiarize sustainability reporting among PLCs in the Philippines.

But the country is now preparing to enter a second phase. Beginning in 2026, the Philippines will implement PFRS S1 and S2 under a three-tier rollout based on company size and market capitalization. 

Unlike the earlier “comply or explain” model, PFRS S1 and S2 require companies to submit comprehensive, financially material disclosures aligned with global investor expectations. While this may sound daunting, the standards also integrate proportionality mechanisms to support smaller firms and grant reliefs in order to adjust to the new requirements. A digital platform is also being developed to help streamline the reporting process, making it more accessible and efficient. Over time, these changes are expected to strengthen the quality, consistency, and comparability of sustainability reporting across the country.

Understanding IFRS S1 and S2

At the heart of the Philippines' upcoming sustainability reporting standards are IFRS S1 and S2, which form the global baseline for sustainability-related financial disclosures that aim to integrate sustainability into financial reporting rather than treat it as a separate or optional add-on.

MSMEs

While listed companies and large corporations are the primary targets of current regulations, micro, small, and medium enterprises (MSMEs) make up over 99% of businesses in the Philippines. 

Unlike PLCs, MSMEs are not currently required by law to submit sustainability reports under SEC or PFRS S1/S2 regulations.

However, they face increasing indirect pressure: PLCs will eventually report material Scope 3 emissions, which include upstream and downstream impacts in which MSMEs play a part.  As key players in supply chains, MSMEs may be asked to provide relevant data for those disclosures. 

Despite the potential competitive advantage that reporting offers, many MSMEs are at a disadvantage. As the Association of Certified Public Accountants in Public Practice (ACPAPP) notes, most SMEs lack the technical know-how, human resources, or budget to develop structured sustainability reports and see sustainability reporting as a compliance burden rather than an opportunity. In 2024, the SMILEES Roadshow introduced SMEs to sustainability reporting concepts and tools. There is also a five-year initiative between the Department of Trade and Industry (DTI) and GRI, named “Embedding Sustainability in the Value Chain of MSMEs”, that aims to facilitate policy discussions and capacity building with enterprises in order to support Filipino SMEs in their sustainability journeys. Crucially, to drive reporting of SMEs, a template aligned with the reports required of PLCs, called the Sustainable Practices and Reporting Kickoff (SPARK) template, was digitally integrated into the ESGpedia platform. 

MSMEs play a crucial role in supply chains, community development, and environmental stewardship, and enabling them to disclose can help these firms stay competitive and allow them to contribute to the Philippines’ sustainability agenda.

So far, we’ve explored the “what” of sustainability reporting in the Philippines: what’s required, how it evolved, and where it’s going next. But this is only half the picture.

In the next installment of this series, we’ll move from rules to practice, exploring how companies can write better sustainability disclosures, and more importantly, how they can make these disclosures useful, credible, and aligned with business strategy. Ultimately, reporting is not about ticking boxes. It’s about telling a clear, honest, and forward-looking story that reflects a company’s role in creating a more sustainable Philippines.