Sustainability as strategy: Unlocking business potential through compliance
In brief:
- Companies should see PFRS-aligned sustainability reporting as a strategic opportunity to strengthen their core business, as integrating sustainability into strategy leads to greater confidence, profitable growth, and improved stakeholder engagement, positioning them for long-term success in a complex business landscape.
- To effectively integrate sustainability into strategy, companies must embed it in their governance framework to ensure accountability and alignment with business objectives.
The Philippines has taken a significant step toward aligning with the global movement for consistent and transparent sustainability disclosures. On 22 December 2025, the Securities and Exchange Commission issued Memorandum Circular No. 16, Series of 2025, requiring publicly-listed companies (PLCs) and large non-listed companies (LNLs) to adopt Philippine Financial Reporting Standards (PFRS) on Sustainability Disclosures starting FY2026, with limited extensions of transition reliefs and under a tiered approach.
To comply with the requirements of the memorandum circular, PLCs and LNLs will need to provide information about their governance, strategy, risk management and performance related to sustainability matters. In addition, external limited assurance of Scope 1 and 2 Greenhouse Gas (GHG) emissions will be required two years after the implementation of PFRS S1 and S2 for each tier.
These requirements provide companies with a structured framework for integrating sustainability into their business practices while meeting investors’ demands for greater transparency.
Integrating sustainability reporting
The benefits of the sustainability reporting will be realized when integrated into core business, not just as a compliance exercise.
Companies should view reporting under the PFRS on Sustainability Disclosures as a strategic opportunity to enhance their core business. The Standards provide a framework for sustainability-related disclosures, enabling companies to embed sustainability into their operations.
An EY report, “The Future of Sustainability in Business: Why Success Depends on Integration,” notes that most companies still view sustainability as separate from commercial activities, leading to misalignment between boards and CEOs. Only a select group of leading companies has successfully embedded sustainability strategies within their business practices. The report indicates that organizations with better alignment between sustainability and business objectives are more confident in their outlook.
These companies expect profitable growth, attract and retain talent, achieve key environmental sustainability targets, enhance brand perception, and improve customer retention and engagement. Their boards are also 1.5 times more effective in achieving their sustainability objectives.
When companies treat sustainability reporting as a strategic initiative, they can leverage the insights gained to identify risks and opportunities, optimize resource use, and enhance their competitive advantage. This proactive approach creates long-term value, improves operational efficiency, and contributes positively to society and the environment.
Ultimately, the benefits of sustainability reporting are fully realized only when it is integrated into the overall organizational strategy. Companies embracing this mindset will be better positioned to navigate the complexities of an evolving business landscape and achieve sustainable growth.
A foundational step: integrating sustainability into governance
Effective integration of sustainability begins with embedding it within the governance framework. This ensures that sustainability is woven into the fabric of decision-making processes at the highest organizational levels, not treated as an afterthought.
Often, sustainability is isolated within the Chief Sustainability Officer’s team or another group, making it difficult to influence the broader organization. EY’s Sustainable Value Study found that only 54% of CSOs feel they have the authority to hold others accountable for their sustainability performance. This disconnect often sidelines sustainability strategy. By integrating sustainability into the core business strategy, leaders can unite various functions around a shared goal.
Successfully integrating sustainability involves establishing a clear governance structure that will prioritize sustainability and ensure accountability. The Board and Management’s roles will include setting sustainability goals aligned with the overall business strategy and using measurable key performance indicators (KPIs) that will track progress. Additionally, they must foster a culture of sustainability across all organizational levels and engaging with relevant stakeholders — including employees, customers, investors, and communities — allowing them to understand expectations and incorporate feedback into their sustainability strategies.
Lastly, leaders should integrate sustainability into the risk management framework, enabling companies to anticipate challenges and seize opportunities, leading to a more resilient business.
By starting with a robust governance framework that prioritizes sustainability, companies can create a solid foundation for integrating it into their overall strategy. This approach not only enhances compliance with the PFRS on Sustainability Disclosures but also positions organizations to reap the full benefits of sustainability reporting, driving long-term value and fostering sustainable growth.
While short-term challenges and trade-offs may arise, research shows that an integrated sustainability strategy is most effective. Such a strategy requires alignment and commitment across all levels of the business and its leadership.
Joyce Anne A. Soriano is a Manager of the Sustainability Team of SGV & Co.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
