SEC readies updated sustainability reporting rules

The Securities and Exchange Commission (SEC) is aiming to release updated sustainability reporting guidelines within the year or early next year, a commissioner said.

“We will come out either this year or early next year [with] the next step of Memorandum Circular No. 4, which mandated sustainability reporting for publicly listed companies,” SEC Commissioner Kelvin Lester K. Lee said in a recent interview.

Memorandum Circular No. 4 has a “comply or explain” approach, which means companies are required to attach the annual report template but may provide an explanation for items with still unavailable data.

“If you remember, the setup there is to comply or explain. Moving forward, the intention is to make certain portions of the report mandatory,” Mr. Lee said.

Previously, the SEC was keen on making the entire sustainability report mandatory for publicly listed companies.

“The feedback has been that it might be too difficult for some of the publicly listed companies, especially considering they are not from the same starting point,” Mr. Lee said. “Not everyone is as well-equipped as the big companies.”

“We have to try and accommodate that even if I have been getting some feedback, internationally, that we should be stricter but we have to be cognizant of the limitation of our own entities,” he added.

According to Mr. Lee, the commission has an internally circulating draft of the updated guidelines, but it has yet to set a date for the issuance.

“The aggressive timeline will be the third quarter for public comment. So, the implementation would be either in the fourth quarter this year or first quarter next year,” he said.

In past interviews, the SEC’s position was also to include non-publicly listed companies in the directive.

“I had to change positions because the feedback shows that it is not viable, I think this goes back to the point that no matter how much I want it to happen, no matter how much I want to insist and force the issue, I have to be cognizant, I have to be aware of reality,” Mr. Lee said.

“Because rather than being supportive of business, I might be, inadvertently, a hindrance to business. We still want to be known for ease of doing business,” he said.

“Very quickly, if we mandate this for the smaller corporations like even one-person corporations, it might discourage them, so, we have to acknowledge that. That’s the context why the direction is like that, we are limiting it for now to publicly listed companies,” he added. — By Justine Irish D. Tabile