Carbon/GHG accounting is now a mandatory part of corporate reporting in the Philippines. Under SEC Memorandum Circular No. 16, Series of 2025, the SEC formally adopted PFRS S1 and PFRS S2. PFRS S1 covers general sustainability disclosures, while PFRS S2 covers climate-related disclosures. As a result, the old “comply or explain” template under SEC MC No. 4, Series of 2019 no longer applies. Listed companies must now report greenhouse gas (GHG) emissions with the same rigor as their financial statements.
Why Carbon Accounting Ends Voluntary ESG
In the past, many companies treated their GHG figures as a communications exercise. However, PFRS S2 places climate disclosures right alongside the financial statements. Therefore, auditors, investors, and regulators will expect those numbers to hold up under scrutiny.
This shift changes what carbon accounting demands. Emissions data now needs the same internal controls, ledger discipline, board oversight, and auditability that finance teams apply to revenue. In other words, if you can’t trace a number to its source, recalculate it, and explain it, that number is a compliance risk.
Unfortunately, many Philippine companies still build GHG inventories the old way. First, they chase electricity and fuel bills from each site. Then, they key the data into spreadsheets and apply emission factors by hand. Because every manual handoff is a potential point of failure, errors creep in. For example, missing invoices, inconsistent units, and overwritten formulas are exactly what an assurance provider will flag.
The SEC Timeline for PFRS S2 Compliance
The SEC is rolling out mandatory reporting in tiers. Each tier depends on a company’s market capitalization as of December 31, 2025.
- Tier 1 (large-cap PLCs): Market capitalization above ₱50 billion. The first mandatory report covers FY 2026 and is due in 2027.
- Tier 2 (mid-cap PLCs): Market capitalization between ₱3 billion and ₱50 billion. The first mandatory report covers FY 2027 and is due in 2028.
Keep in mind that a report covering FY 2026 draws on data from 2026. In other words, Tier 1 companies are already in their first reporting period, and their teams are generating the records auditors will test right now. Meanwhile, Tier 2 companies have more time. Still, setting up systems, controls, and data owners takes months, so a trial run on FY 2026 data makes sense. Read more about the PFRS S1 and S2 Timeline here.
How to Build an Audit-Ready GHG Inventory
Strong PFRS carbon accounting rests on five foundations.
- Set clear boundaries. Define which entities, facilities, and operations you include. Follow the GHG Protocol, which PFRS S2 references. Where possible, match your boundary to how you consolidate your financial statements.
- Cover all three scopes. PFRS S2 requires disclosure of Scope 1 (direct), Scope 2 (purchased energy), and Scope 3 (value chain) emissions. However, IFRS S2 gives first-year relief on Scope 3, so check which transition reliefs the SEC adopted.
- Keep source data traceable. Link every figure to an invoice, meter reading, or supplier record. In addition, collect data in one central system instead of site-by-site emails.
- Document your methodology. Record which emission factors you use, such as the Philippine grid emission factor. Also note where each factor came from and why you chose it, because auditors will ask.
- Build controls and oversight. Assign data owners, require reviews and approvals, and keep a change log. Finally, give the board regular updates on climate metrics, just as you would for financial results.
Start Your PFRS Carbon Accounting Journey Today
The companies with the smoothest first PFRS S2 cycle will be the ones treating carbon like a financial ledger today, not the ones scrambling to rebuild a year of utility bills months before the deadline.
Not sure where your current GHG inventory stands? Book a consultation with our team. We’ll review your existing data, identify gaps against PFRS S2 requirements, and map out a practical path to an audit-ready carbon ledger.
