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The inevitable evolution of corporate reporting in the Philippines

IN today's age, the global viewpoint on ESG (environmental, social and governance) compliance is that it has become an essential aspect of corporate reporting. With the environment deteriorating at an alarming rate and social inequities persisting, businesses need to adopt sustainable practices that promote social equity and ensure long-term sustainability. As a result, regulatory bodies worldwide are taking exponential steps toward ensuring transparency and accountability in corporate reporting. ESG compliance is no longer a choice but a must for businesses to thrive in the current global landscape.


Fortuitously, I had the privilege to be part of the recently concluded Picpa Accountancy Week Celebration ― Public Accounting Industry Sector Day, a remarkable event that unfolded on July 18, 2023. One of the topics that caught my attention was the discussion on ESG compliance, its impact and how public practice should prepare for what's to come.


The discussion emphasizes that the march toward a heightened ESG compliance focus is inevitable. It is poised to establish itself as a fundamental component within the reporting framework for companies operating in the Philippines. Furthermore, accountants were encouraged to pay more attention to ESG compliance as it will become an essential component of the practice.


What is ESG?

ESG is a comprehensive and practical approach to assessing a business' sustainability practices. Unlike traditional quantitative and financial reporting, ESG compliance delves deeper into how a company interacts with the environment and society, and demonstrates leadership. It evaluates a company's ecological impact, societal interactions and contributions to the community, providing a holistic view of its overall sustainability. In today's world, ESG has become an indispensable aspect of corporate reporting as companies strive to adopt sustainable practices that promote social equity and ensure long-term sustainability.


Why does ESG matter?

The answer lies in the pivotal challenges confronting our world today. An example of this is the environment's gradual decline which gave rise to catastrophic shifts in our climate, now aptly labeled as "global boiling," a stark departure from the relatively benign "global warming" terminology of the past. More and more nations are rallying for sustainable corporate practices to counteract climate shifts, propel social equity and champion fairness in all interactions.


ESG compliance in the Philippines

In the Philippines context, ESG compliance isn't commanding the same spotlight as it does in other global domains. The landscape here is marked by lax regulations or a shortage of mandates that compel corporations to report their ESG-related activities. This relative lack of obligation often leads some businesses to downplay the significance of embracing sustainability. After all, adhering to these mandates could impose a hefty financial burden.


However, a subtle but significant shift is underway. The SEC has long since taken a notable step by introducing Memorandum Circular 4-2019, a directive that necessitates publicly listed corporations to provide their Annual Financial Report and a Sustainability Report (FRSC). Additionally, the once-familiar FRSC is now the FSRSC or the Financial and Sustainability Reporting Standards Council, illuminating a burgeoning commitment within the profession to the cause of sustainability reporting within the Philippine context. Furthermore, the inaugural IFRS Sustainability Disclosure Standards are presently under contemplation by the Philippine Sustainability Reporting Committee. If implemented, these standards would usher in an era where companies are bound to address an exhaustive spectrum of sustainability facets meticulously.


The wheels of change are in motion as regulatory and standard-setting bodies are exponentially taking steps to usher in a new era of transparency. Their aim is clear: to eventually compel companies to disclose pertinent ESG information. It's an imminent evolution that will inevitably beckon Philippine corporations to step into the limelight and provide an unfiltered view of their environmental stewardship, societal impact and governance ethos. The days of evading ESG's grasp are numbered as accountability and disclosure metamorphose into nonnegotiable norms.

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Emmanuel C. Dumayas, CPA, JD is the managing partner of Paguio, Dumayas & Associates, CPAs (PrimeGlobal Philippines) and the chairman of the Media Affairs Committee of the Association of CPAs in Public Practice. His opinion does not reflect in any way those of these institutions.


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