The Securities and Exchange Commission said Wednesday publicly-listed companies will be required to submit an annual sustainability report starting 2020.
Under the sustainability reporting guidelines issued by the corporate regulator, listed companies should report non-financial and sustainability issues like environmental, social and governance aspects of their businesses.
The SEC said the first sustainability report should be attached to the 2019 annual report of listed companies to be submitted in 2020.
It said the non-attachment of the sustainability report to the annual report would be subject to a penalty for an incomplete annual report.
The guidelines will be adopted on a “comply or explain” approach for the first three years of implementation.
This means that while companies would be required to attach the template to their annual reports, they could provide an explanation for items where they still have no available data on.
It said that for companies that already have sustainability reports in accordance with the recognized frameworks and standards, their reports will be considered as their compliance with the reporting template.
The SEC said an increased focus was placed on companies to provide greater disclosure and transparency not only on financial matters but also on non-financial and sustainability issues.
“Companies’ stakeholders now give a greater attention to how businesses impact the economy, environment and society and the way corporations respond to sustainability challenges, in addition to financial challenges, determines their long-term viability and competitiveness. Consequently, sustainability reporting has emerged as a common practice for companies globally,” it said.
The SEC said while 93 percent of the world’s largest 250 companies and 75 percent of the top 100 companies in 49 countries were reporting on sustainability, less than 22 percent of publicly-listed companies in the Philippines had published a report on sustainability impacts and performances
It said sustainability reporting would allow companies to know and better understand their sustainability risks and opportunities which would, in turn, lead to a more effective assessment and management of said risks and opportunities.
The SEC also encouraged companies to assess, and if necessary, update their visions, strategies and business plans to ensure that sustainability is embedded in their organizations. It gives companies the opportunity to determine the necessary changes in their vision, strategies and performance goals/targets for more sustainable operations, it said.
Having a sustainability report improves the company’s image and builds trust and respect for the company and could also attract institutional investors who are now looking at looking to invest in companies that adhere to good environment and social governance standards, the SEC said.