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On 15 February 2019, the Securities and Exchange Commission (SEC) released the Memorandum Circular No. 4, Series of 2019 on the Sustainability Reporting Guidelines for Publicly-Listed Companies (PLCs). The Memorandum Circular took effect on 8 March 2019 and will apply to the 2019 Annual Reports that are to be submitted in 2020.

Under the Memorandum Circular, PLCs are mandated to submit their Sustainability Report together with their Annual Report. For the first 3 years of the submission of the required Sustainability Reports, the SEC is adopting a “comply or explain” approach. This means that PLCs will be required to attach the Reporting Template (which is provided in Annex A of the Circular) but the SEC will allow explanations for the items where the company cannot supply answer if there is no available data yet.

Sustainability is defined under the Memorandum Circular as the development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Relative to this definition, Sustainability Reporting is an organization’s practice of reporting publicly on its significant economic, environmental and social impacts in accordance with globally accepted standards.

The SEC’s goal is to raise awareness among Philippine listed companies on sustainability reporting, under the Memorandum Circular, the SEC has declared the following objectives:

    1. To make sustainability reporting relevant and value adding to Philippine PLCs
    2. To help PLCs to identify, evaluate, and manage their material Economic, Environmental and
    3. Social risks and opportunities
    4. To help PLCs to assess and improve their non-financial performance across Economic, Environmental and Social aspects of their organization to optimize business operations, improve competitiveness and long-term success
    5. To provide a mechanism that would allow the PLCs to communicate with their stakeholders, including investors or its potential investors
    6. To enable PLCs to measure and monitor its contributions to universal targets of sustainability such as the United Nations Sustainable Development Goals and the Ambisyon Natin 2040 (the long- term vision statement released by the Philippine National Economic and Development Authority).

The Sustainability Reporting Guidelines (Guidelines) focuses on the economic, environmental and social disclosures which are in addition to the governance disclosures that are embodied in the  Integrated Annual Corporate Governance Reports. These Guidelines relates to disclosures that contribute to describing and measuring the company’s sustainability performance. Broadly, sustainability performance is measured in the way the corporation conducts its business and how it manages its key economic environmental and social impacts.

As a brief overview, the disclosure topics under the Guidelines include Economic Disclosures, Environmental Disclosures and Disclosures on Social Topics.

Economic Disclosures involve how the company directly increases the pool of economic resources that flows in the local and national economy, it involves topics on procurement practices and anti-corruption practices for the company.

Environmental Disclosures relate to how the company manages natural resources and how the company minimizes its negative impact to the environment, it involves data on resource management,
environmental compliance and environmental impact including air emission, solid and hazard waste management, etc.

Finally, disclosures on Social Topics relate to how the organization manages its relationship with its stakeholders (such as their employees, customers, suppliers, communities, the public and the government). It involves topics related to human rights, access to and quality of products and services, business practices in marketing and customer privacy and data security.

The SEC has likewise provided an extensive explanation on materiality assessment. In sustainability reporting, materiality is the principle that determines which relevant topics are sufficiently important to the company that it is essential to report on them. The Memorandum Circular provides that the disclosures should only be on topics determined by the PLC as material after conducting their own materiality assessment in accordance with the Guidelines.

Actions to Consider

PLCs should consider the additional reporting requirement by the SEC in preparing their 2019 Annual Report. Non-attachment of the Sustainability Report to the 2019 Annual Report is subject to the penalty for Incomplete Annual Report.


Alain Charles Veloso is a partner in Quisumbing Torres’ Corporate & Commercial Practice Group. He has 11 years of legal practice, advising several investment banks, funds, and multinational corporations with regard to their transactions in the Philippines, including private and public M&A transactions, debt, and equity capital markets transactions, and structuring and establishment of their Philippine presence, as applicable.


Ariane Mae Vallada is an associate in Quisumbing Torres' Banking & Finance Practice Group. She has four years of legal experience in corporate law, banking and finance and capital markets. Prior to joining the firm, she was a Junior Associate in one of the top tier law firms in the Philippines.