The Securities and Exchange Commission (SEC) is currently developing the draft revised Sustainability Reporting (SR) Guidelines and the Sustainability Reporting (SuRe) Form, with plans to release them this year.
Mara Ruiz, SEC’s chief counsel for corporate governance and finance, announced that the Commission is working on improving SEC Memorandum Circular No. 4 series of 2019, or the Sustainability Reporting Guidelines for Publicly Listed Companies, to promote consistency and uniformity in the reported sustainability measures.
With the revised guidelines, SEC aims to further enhance the quality of sustainability reporting and ensure consistency of non-financial information submitted by publicly listed companies or PLCs, reflecting the increasing significance of sustainability in the corporate world.
PLCs are mandated to submit their sustainability reports but only on a “comply and explain” basis, which does not require them to fill in and submit a detailed sustainability reporting form.
“We’re currently revising the standards to update and to become more in line with the latest global developments,” said Ruiz in a recent trade conference in Makati. “The aim is to promote sustainability reporting in order for companies to assess their performance in environment, economic and social matters.”
The revised rules take into consideration global sustainability standards such as IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-Related Disclosures). They also consider the Sustainable Development Goals, the Global Reporting Initiative, and the International Standards of Accounting and Reporting.
Also being looked at is the Philippine Standard Industrial Classification to make the standards more locally relevant.
“We recognize that each industry in the Philippines has unique sustainability challenges and environmental impact and we want to acknowledge and emphasize these unique differences in the report,” Ruiz said.
The latest draft guidelines have two parts: the sustainability and climate related opportunities and risk exposures score and the industry specific metrics.
“We hope to release the revised guidelines in 2025, so the reporting will be in 2026,” Ruiz continued, adding that there will be a phased implementation timeline which will cover listed companies by tiers depending on their size, whether large, medium or small listed companies.
“However, we will still be issuing the appropriate guidelines for more details on the coverage of the submission of sustainability report,” she continued.
The executive also highlighted the benefits of sustainability reporting for companies, including improved company reputation, enhanced internal management, better product or service, access to more capital, higher employee satisfaction, and better financial returns.
She likewise emphasized the case for adopting sustainable practices by pointing out the link between sustainability and profitability. She noted that sound sustainability standards lower the cost of capital of companies by 90%, increase their operational performance by 88%, and raise their stock price performance by as much as 80%.
Since the issuance of the Sustainability Reporting Guidelines in 2019, the SEC has witnessed a steady increase in the submission of sustainability reports by PLCs. In 2021, the compliance rate reached 95%, underscoring the growing recognition of the importance of sustainability reporting among businesses. This marks a significant shift from the 22% compliance rate in 2017 before the release of the guidelines.
