The New Era of Mandatory ESG in the Philippines: A Comprehensive Guide to SEC MC No. 16-2025

The corporate landscape in Southeast Asia has shifted. On December 22, 2025, the Philippine Securities and Exchange Commission (SEC) issued Memorandum Circular No. 16, Series of 2025. This landmark regulation officially adopts the Philippine Financial Reporting Standards (PFRS) on Sustainability Disclosures, moving the country from a voluntary "comply or explain" model to a strictly mandatory framework.

At C² (Csquare), we recognize that this is a pivotal moment for global transparency. The new standards, PFRS S1 and PFRS S2, are direct adoptions of the International Sustainability Standards Board (ISSB) standards. For any business operating in or partnering with the Philippines, understanding these requirements is no longer optional.

Understanding the Core Standards: PFRS S1 and S2

The new standards focus on the financial materiality of sustainability. This means companies must report on how environmental and social factors impact their financial health and future value.

• PFRS S1 (General Requirements): This standard sets the baseline for disclosing sustainability related risks and opportunities. It ensures that ESG data is reported with the same rigor as traditional financial statements.

• PFRS S2 (Climate related Disclosures): This focuses specifically on climate governance, physical risks such as extreme weather, and transition risks such as carbon taxes or policy shifts.

  
  

C² (Csquare) provides the technical expertise to help organizations map these complex risks and translate them into investor ready disclosures.

The Phased Implementation Timeline

The SEC is rolling out the mandate in three distinct tiers based on market capitalization and revenue. C² (Csquare) advises all covered entities to identify their tier immediately to prepare for the first filing cycle.

Tier	Covered Entities	Mandatory Reporting Year
Tier 1	PLCs with market cap > ₱50 Billion	Fiscal Year 2026
Tier 2	PLCs with market cap ₱3 Billion to ₱50 Billion	Fiscal Year 2027
Tier 3	All other PLCs and Large Non Listed Entities (LNLs) with revenue > ₱15 Billion	Fiscal Year 2028

How This Affects Companies in India

The impact of the Philippine SEC mandate extends far beyond its borders. Indian companies, particularly those with global operations or extensive trade links, must prepare for significant ripple effects. C² (Csquare) has identified three primary areas of impact for Indian businesses.

1. Compliance for Indian MNC Subsidiaries

Many Indian multinational corporations in the IT-BPM, pharmaceuticals, and manufacturing sectors have a major presence in the Philippines. If an Indian subsidiary meets the ₱15 Billion (approx. ₹2,200 Crores) revenue threshold, it must comply with PFRS Tier 3 requirements. C² (Csquare) specializes in assisting Indian parent companies in aligning their global subsidiary data with these local standards.

2. Bridging the Gap: SEBI BRSR vs. PFRS

While Indian listed companies are familiar with SEBI’s Business Responsibility and Sustainability Reporting (BRSR), there are fundamental differences. BRSR emphasizes social impact and stakeholder responsibility, whereas PFRS (ISSB) is focused on financial materiality for investors. Indian firms must learn to reformat and refine their BRSR data to meet the investor centric demands of PFRS. C² (Csquare) provides the bridge between these two frameworks to avoid reporting duplication.

3. Supply Chain and Scope 3 Pressure

Even if an Indian company does not have a physical presence in the Philippines, they may be a supplier to a Tier 1 Philippine PLC. Although the SEC has granted a two year grace period for Scope 3 (value chain) emissions, these large Philippine corporations will soon require carbon data from their international partners. C² (Csquare) helps Indian suppliers build the data infrastructure needed to meet these global client demands.

Mandatory Assurance and Transitional Reliefs

One of the most significant aspects of MC 16-2025 is the requirement for mandatory limited assurance on Scope 1 and Scope 2 emissions by an independent practitioner. This becomes mandatory two years after a company begins reporting.

To help businesses transition, the SEC has provided specific reliefs:

• A two year exemption on Scope 3 emissions reporting.

• The option to report only climate related information (PFRS S2) in the first year.

• No requirement for comparative data in the inaugural report.

  
  

The shift to mandatory sustainability reporting is a challenge, but it is also an opportunity to prove resilience to global investors. Whether you are a Philippine firm or an Indian multinational, C² (Csquare) is here to ensure your reporting is accurate, compliant, and strategic.

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