IS your business prepared for the rising wave of sustainability regulations?
Sustainability reporting is no longer a peripheral concern but has become a core component of business regulatory compliance across the globe, including in the Philippines. The Securities and Exchange Commission (SEC) has played a pivotal role in this shift by making sustainability reporting mandatory for publicly listed companies (PLCs), placing it on the same level of importance as financial reporting. But what does this mean for businesses, and who should lead the charge?
The rigor required for sustainability reporting now mirrors that of preparing annual financial statements. As a result, finance teams are stepping up, with many taking the lead in this critical process. Deloitte’s worldwide ESG reporting benchmark reveals that chief financial officers (CFOs) are increasingly in the spotlight, with 32 percent of organizations reporting that their CFO is the executive accountable for sustainability reporting. Furthermore, 16 percent of organizations share this accountability between the CFO and chief sustainability officer. This trend underscores the growing alignment between financial and sustainability reporting.
As CFOs take on this role, regulatory bodies are responding with more robust frameworks to guide businesses. The SEC’s recent revisions to the Sustainability Reporting Guidelines — based on the International Sustainability Standards Board’s issuance of the International Financial Reporting Standards (IFRS) S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) reporting standards last year — will require PLCs to submit the updated Sustainability Report (SuRe) Form. The new SuRe form fully integrates the IFRS S1 and S2 standards.
The form will have three major sections: Sustainability and Climate-related Opportunities and Risks Exposures (SCORe), Cross-Industry Standard Metrics and Industry-Specific Metrics. With the SCORe form, PLCs are now mandated to estimate the qualitative and quantitative impacts of both physical and transition risks to their business. Physical risks can be acute, such as the frequency and severity of extreme weather events, and chronic, which pertains to the long-term changes in climate patterns. On the other hand, transition risks may take the form of policy and legal risks, technology risks, market risks, and reputational risks.
While these revisions currently target PLCs, smaller enterprises should not overlook the importance of preparing to adopt the reporting standards and reassessing their climate change mitigation measures. Given the Philippines’ vulnerability to climate change impacts, proactive climate risk management is crucial for mitigating business disruptions, maintaining competitive advantage, preparing for future regulations, and building overall business resilience.
Deloitte’s paper on the CFO’s building block for success highlights that successfully navigating mandatory sustainability reporting requires organizations to assess their readiness. They need to thoroughly understand the reporting requirements and ensure they have the necessary capabilities for effective execution. Furthermore, it also underscored that CFOs must ensure their reporting frameworks are robust enough to not only meet compliance standards but also drive business value through sustainability initiatives.
For CFOs, this presents both a challenge and an opportunity. The challenge arises from the need for substantial investments in manpower, data systems, analysis and reporting systems to meet stricter standards. Additionally, many investors may also expect sustainability reports to be assured, much like financial statements, to ensure accuracy and transparency.
Furthermore, as mandatory disclosures become the norm, CFOs have the opportunity to elevate their company’s sustainability performance. By going beyond mere compliance, they can unlock several benefits, including energy savings, access to sustainability-linked loans, government incentives, and enhanced reputational value. Companies that lead in sustainability are more likely to attract investment from local and global investors and achieve long-term growth.
The distinction is clear: businesses that view sustainability reporting as merely a regulatory requirement risk falling behind. In contrast, forward-thinking companies that approach it as a strategic imperative are poised to gain a competitive edge and create lasting value. As climate-related regulations evolve, the question for businesses is not whether to embrace sustainability but how swiftly they can transform their approach to seize these opportunities.
Ma. Celina Anonuevo is a sustainability & emerging assurance senior manager, while Jesus Lava III is the ESG assurance leader at Deloitte Philippines, a member of the Deloitte Asia Pacific Network. For comments or questions, email [email protected].
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