Chapter 4: Sustainability Reporting Guidelines for Philippine Publicly List

To promote sustainability reporting and make it relevant for Philippine publicly listed companies
(PLCs), the Securities and Exchange Commission (SEC), in its en banc meeting on 12 February
2019, resolved to issue the Sustainability Reporting Guidelines for Publicly Listed Companies.
The Guidelines is intended to help PLCs assess and manage non-financial performance across
Economic, Environmental and Social aspects of their organization and enable PLCs to measure
and monitor their contributions towards achieving universal targets of sustainability, such as the
United Nations Sustainable Development Goals, as well as national policies and programs, such
as AmBisyon Natin 2040.

The need to promote sustainability reporting to Philippine companies served as the impetus for
the SEC to include Principle 10 in the Code of Corporate Governance for PLCs stating that
companies should ensure that material and reportable non-financial and sustainability issues are
disclosed. Recommendation 10.1 of the same Code further provides as follow:

“The board should have a clear and focused policy on the disclosure of non-financial
information, with emphasis on the management of economic, environmental, social and
governance (EESG) issues of its business, which underpin sustainability. Companies should
adopt a globally recognized standard/framework in reporting sustainability and non-financial
issues.”

The Sustainability Reporting Guidelines for Publicly Listed Companies was crafted with the
following objectives:
 Make sustainability reporting relevant and value adding for Philippine PLCs.
 Help PLCs to identify, evaluate and manage their material Economic, Environmental and
Social (EES) risks and opportunities
 Help PLCs to assess and manage their non-financial performance across EES aspects of
their organization to optimize business operations, improve competitiveness, and long-
term success.
 Provide a mechanism that would allow PLCs to communicate with its stakeholders,
including investors or its potential investors
 Enable PLCs to measure and monitors its contributions towards achieving universal
targets of sustainability, such as the United Nations Sustainable Development Goals as
well as national policies and programs, such as AmBisyon Natin 2040.

The Guidelines recognizes that sustainability reporting is a journey and that the PLCs would be
at different levels in this journey; while some may already be advanced, most are just beginning.
As such, the Guidelines may be seen as an introductory tool for those companies who are just
starting on their journey. Please note that companies are not required to disclose on al topics
provided in the Reporting Template (Annex A of the Guidelines. Rather, disclosure should only
be on topics determined by companies as material after an assessment of materiality, which is
discussed in more detail in the Materiality Assessment section. Nevertheless, companies are
encouraged to move at any time beyond and disclose more information than that required under
the Guidelines, especially other initiatives which the company considers as contributing to the
United Nations Sustainable Development Goals (UN SDGs). For other companies already
reporting in accordance with internationally recognized sustainability frameworks or standards,
their sustainability reports shall be considered as their compliance. However, they are
encouraged to use the Guidelines as a guide, particularly for climate-related disclosures.

Submission with SEC Form 17-A

The reporting template (Annex A of the Guidelines) shall be submitted together with the
company’s Annual Reports (SEC Form 17-A). The first report shall be attached to the 2019
Annual Reports to be submitted in2020. For companies who already have sustainability reports
in accordance with internationally recognized frameworks and standards, their reports shall
already be considered as their compliance with the reporting template. Companies may choose to
attach the whole sustainability report to their Annual Report or just include a statement providing
a link to said report.

Comply or Explain Approach

The Guidelines shall be adopted on a “comply or explain” approach for the first three years upon
implementation. By “comply or explain”, it means that companies would be required to attach
the template to their Annual Reports, but they can provide explanations for items where they still
no available data on.

Penalty for Non-attachment of the Sustainability Report to the Annual Report

Non-attachment of the Sustainability Report to the Annual Report shall be subject to the penalty
for “incomplete annual report” provided under SEC Memorandum Circular No. 6, Series of 2005
(Consolidated Scale of Fines”

Sustainability Reporting Principles

The Reporting Principles for defining report quality guide choices on ensuring the quality of
information in a sustainability report, including its proper presentation. The quality of
information is important for enabling stakeholders to make sound and reasonable assessments of
an organization, and to take appropriate actions.

Impact. An organization is faced with a wide range of topics on which it can report. Relevant
topics, which potentially merit inclusion in the report, are those than can reasonably be
considered important for reflecting the organization’s economic, environmental, and social
impacts, or substantively influencing the assessment and decisions of stakeholders. In this
context, “impact” refers to the effect and organization has on the economy, the environment,
and/or society (positive or negative). A topic can be relevant – and so potentially material –
based on only one of these dimensions. Reporting organizations are also expected to report on
their impacts that are directly linked to their activities, products, or services through a business
relationship. It should be noted that “impact does not refer to and effect upon organization, such
as change to its reputation.

Stakeholder Inclusiveness. The reporting organization should identify its stakeholders and
explain how it has responded to their reasonable expectations and interest. It should also provide
insight into the nature and quality of the organization’s relationships with its key stakeholders,
including how and to what extent the organization understands, considers, and responds to their
legitimate needs and interests. Stakeholders provide useful insights about matters that are
important to them, including economic, environmental, and social issues that also affect the
ability of the organization to create value.*Stakeholders are defined as entities or individuals that
can reasonably be expected to be significantly affected by the reporting organization’s activities,
products, or services; or whose actions can reasonably expected to affect the ability of the
organization to implement its strategies or achieve its objectives.*

Balance. Reporting mush have no bias in the selection or presentation. The reported information
shall reflect positive and negative aspects of the reporting organization’s performance to enable a
reasoned assessment of overall performance. Reporting may also be compared against previously
reported targets, projections, and expectations.

Completeness. The report shall include coverage or material topics and their boundaries,
sufficient to reflect significant economic, environmental, and social impacts, and to enable
stakeholders to assess the reporting organization’s performance in the reporting period. The
reporting organization should consider the extent of information discloses and its level of
specificity or preciseness, which might involve considering potential concerns regarding
cost/benefit, competitive advantage, and future-oriented information.

Reliability. The reporting organization should gather, record, compile, analyze, and report
information and processes used in the preparation of the report (like maintaining and audit trail)
in a way that they can be subjected to examination, and that established the quality and
materiality of the information. For purposes of this Guidelines, and as defined in the GRI
Standards, ‘impact’ shall refer to the effect an organization has on the economy, the
environment, and/or society, which in turn can indicate its contribution (positive or negative) to
sustainable development. Reporting organizations are also expected to report on their impacts
that are directly linked to their activities, products, or services through a business relationship. It
should be noted that ‘impact” does not refer to an effect upon an organization, such as a change
to its reputation.

Accuracy. The reported information should be sufficiently accurate and detailed for stakeholders
to assess the reporting organization’s performance. Reports should include proper citation of
information sources, including estimated data and methodology for estimation.

Consistency and Comparability. The information in the report should be selected, compiled,
and presented on a basis that is consistent over time and in a way that enables analysis of any
changes in the organization’s performance over time. It must also be presented in a way that
enables comparison with other organizations to the extent it is material to the organization’s own
ability to create value over time.
SUSTAINABILITY REPORTING FRAMEWORK
The over-all sustainability reporting framework for Philippine PLCs follows this structure:

We conduct our businesses in Corporate Governance

and ETHICAL and
OUR COMPANY is a RESPONSIBLE manner
Sustainable Business Economic
We manage our KEY Environmental
IMPACTS Social
Out products and services Contribution to Sustainable
create VALUE TO SOCIETY Development

With this framework in mind, the sustainability reporting guidelines is crafted for PLCs
operating in the Philippines with a goal of making sustainability reporting relevant and value-
adding for companies. The Sustainability Reporting Guidelines for Publicly Listed Companies
focuses on economic, environmental and social disclosures since governance disclosures are
made in the Integrated Annual Corporate Governance Report (I-ACGR) submitted separately to
SEC.

Beyond the purpose of transparency, it is designed to help PLCs assess their non-financial
performance across environment,economic, and social aspects of their organization to optimize
business operations, improve competitiveness, and long-term success. Disclosures contained in
this guideline are those that contribute to describing and measuring the company’s sustainability
performance. Broadly, sustainability performance is measured in the way the corporation
conducts its business, and how it manages its key economic, environmental and social impacts. It
builds on the principles and metrics provided by the GRI 10 Standards, SASB Standards, TCFD
Recommendation and other internationally accepted standards for non- financial reporting.

DISCLOSURE TOPICS
Disclosures should reflect the organization’s significant economic, environmental, and social
impacts and should consider the reasonable expectations and interests of key stakeholders.
Disclosures should also address the organization’s climate-related risks and opportunities
(climate-related issues). Whenever applicable, these disclosures should be quantifiable and
measurable, effectively providing a snapshot of and organization’s non-financial performance for
the reporting period. The quality and content of the disclosures should also be aligned with
widely recognized reporting principles. The Disclosures shall be made using the Annex A:
Reporting Template of the Guidelines. Again, for companies already reporting in accordance
with internationally recognized sustainability frameworks or standards, their sustainability
reports shall be considered as their compliance. For additional guidance on the disclosure topics,
organization may refer to Annex B: Topic Guide of the Guidelines.
1. Economic
The most important and commonly accepted dimension of sustainability is “economic
performance.” The primary goal of any business organization is to create shareholder value
through generating sustainable economic performance by focusing on activities that generate
long-term corporate profitability and improved effectiveness and efficiency of production. Long-
term economic sustainability performance should be communicated to shareholders through the
preparation of high-quality financial reports in compliance with global accounting and
sustainability reporting standards and frameworks. The traditional corporate reporting model
reflects financial information disseminated to shareholders whereas business sustainability
covers a broad range of stakeholders and reflects a broader range of multiple-bottom-line ESG
performance.

The economic dimension of sustainability should reflect the financial strengths and concerns of
an organization as well as the economic impacts on its stakeholders and society. Economic
sustainability performance can be measured directly through financial activities between an
organization and its stakeholders or indirectly through non-financial costs and benefits of
economic relations and their effects on stakeholders. Economic disclosures relate to how the
company directly increases the pool of economic resources that flows in the local and national
economy. Included in the disclosures are the risks and opportunities due to climate change,
procurement practices with respect to local suppliers and anti-corruption.

2. Environment
Stakeholders are demanding clearer and more transparent information about the impacts of an
organization’s activities and operations on the environment beyond what is legislated for by law.
The environmental dimension of sustainability performance enables business organizations to
assess the impact of their operation on the environment and reflects the company’s efforts in
leaving a better environment for the next generations. The environmental dimension of
sustainability performance includes creating a better work environment, reducing the carbon
footprint, improving air and water quality and maximizing the positive effects of an organization
on natural resources and the environment. Effective achievement of environmental sustainability
performance requires businesses to create the right balance in maximizing their economic profit,
protecting the environment and ensuring a better environment for the next generations.
Environmental disclosures relate to how the company manages the natural resources it needs, for
its business, as well as how it minimized its negative impacts to the environment, including
biodiversity. The company’s ability to access materials needs for its operations is critical to
company’s long-term success.

3. Social
The social dimension of sustainability performance reflects the transformation of social goal into
practices that benefit and organization’s stakeholders and is measured through the principles,
actions, and corrective initiatives implemented. Social performance, or the social bottom line,
measure and organization’s social mission and its alignment with the interests of society by
including accepted social values and fulfilling social responsibility. The social dimension of
sustainability performance ranges from ensuring high quality products and services, better
customer satisfaction and improved employee health and well-being, to making a positive
contribution to the sustainability of the planet and quality of life for future generations

Social performance and responsibilities are obligations to respond effectively to societal and
stakeholder concerns by integrating social considerations into business strategic decisions,
activities and operations through voluntary initiatives that go above and beyond regulatory
requirements and philanthropic activities. Many factors have encouraged companies to engage in
corporate social responsibility activities including consumer activism, corporate malfeasance and
improper corporate behavior and actions and socially responsible investing (SRI). Social
performance involves three components: (a) the identification of the domains of an
organization’s social responsibility; (b) the development of processes to evaluate stakeholder
demands; and (c) the implementation of programs to manage social issues.

Disclosures on social topics relate to how the organization manages its relationship with its
stakeholders such as employees, customers, suppliers, communities, the public and the
government. It includes disclosures on issues related to human rights, access to and quality of
products and services, responsible business practices in marketing, customer privacy and data
security

UN SUSTAINABLE DEVELOPMENT GOALS

The Sustainable Development Goals (SDGs), otherwise known as the Global Goals, are a set of
objectives within a universal agreement to end poverty, protect all that makes the planet
habitable, and ensure that all people enjoy peace and prosperity, now and in the future. The
SDGs were adopted by the United Nations General Assembly in September 2015, for the period
2016 to 2030 to address the overwhelming empirical and scientific evidence that the world needs
a radically more sustainable approach. The goals provide a well consulted framework that is
sufficiently scientifically robust, politically acceptable, and publicly intuitive. The practical and
political importance of the SDGs, and the challenges associated with them, can only truly be
appreciated by understanding what preceded them.

The Millennium Development Goals (MDGs) were in place from 2000 to 2015 and consisted of
eight international development goals. The first three goals covered poverty, education and
gender equality; the next three goals addressed ‘health outcomes’ covering child mortality,
maternal health and ‘HIV/AIDS, malaria and other diseases. The remaining two goals addresses
environmental sustainability and global partnership for development. These eight MDGs were
supported by a total of 21 individual targets.

The MDGs, although a move in the right direction, were subject to certain criticisms. One was
that there was insufficient analysis to justify why these goals were selected as priorities and
insufficient information available to be able to compare performance, especially in tackling
inequalities within countries. This highlighted the perennial challenge in such initiatives of
balancing political consensus with scientific validity. Nevertheless, based on data compiled by
the Inter-Agency and Expert Group on MDG indicators, unprecedented results have been
achieved worldwide, making MDGs the most successful global anti-poverty program in history.
In developing areas, the number of people living in extreme poverty dropped from 1.9 billion to
836 million; the proportion of people living in extreme poverty dropped from 47% in 1990 to
14% in 2015; the net enrollment rate of primary schools in developing regions increased from
83% in 2000 to 91% in 2015; the global under-five mortality rate dropped from 9% in 1990 to
4.3% in 2015; the proportion of the global population has access to improved drinking water
source increased from 76& to 91%. However, the report recognized that progress has been
uneven across region and countries in the implementation of the MDGs.

Perhaps most importantly, the Millennium Development Goals focused primarily on the needs of
developing countries reinforcing a binary view of rich and poorer countries, of donors and
recipients and implying that the global challenge is a problem of development which
international aid can help address, rather than set of shared problems which only collective
action globally can resolve. In contrast to the MDGs, the SDGs are both broader in score, more
collective in action, and more detailed in content, including clear message that every nation must
act if success is to be realized. The UN and various scholars have summarized the difference
between the two approaches as follows:

1. The 17 Sustainable Development Goals (SDGs) with 169 targets are more comprehensive
and Specific and go further than the MDGs by addressing the root causes of poverty and
the universal need for development that works for all people. The goals cover the three
dimensions of sustainable development: economic growth, social inclusion and
environmental protection.
For example, the goal of MDGs for poverty is to “eradicate extreme poverty and
hunger”, while the goal of SDGs is to “end poverty in all its forms everywhere”.
Moreover, while MDGs focused on a higher enrollment rate of school, SDGs propose to
improve the quality of ion.
2. Building on the success and momentum of the MDGs, the new global goals cover more
ground, with ambitions to address inequalities, economic growth, decent jobs, cities and
human settlements, industrialization, oceans, ecosystems, energy, climate change,
sustainable consumption and production, peace and justice.
3. The new Goals are more universal and apply to all countries with high, middle, and low
income, whereas the MDGs were intended for action in developing countries only.
4. A core feature of the SDGs is their strong focus on means of implementation: the
mobilization of financial resources; capacity-building and technology; as well as data and
institutions.
5. The new Goals recognize that tackling climate change is essential for sustainable
development and poverty eradication. SDG 13 aims to promote urgent action to combat
climate change and its impacts.
6. SDGs pay more attention to the bidirectional nature of cooperation than MDGs did.
MDGs emphasized sending aid from developed countries to developing countries, while
SDGs emphasize subjective initiative and responsibility of all parties.
7. SDGs' introduces data revolution. Goal 17 of SDGs proposes to enhance the ability to
obtain high-quality, timely, and reliable data. This concept was not mentioned in MDGs
8. Transformation of the development paradigm. Compared with the MDGs, SDGs call on
people who live in extreme poverty in developing countries to not only survive, but also
 live with dignity. The core purpose of SDGs is that in the process of achieving poverty
alleviation and promoting economic development, people should not survive at the cost
of damaging the ecological environment and must adhere to and implement the concept
of sustainable development.
Disclosure would be required on how companies are able to contribute to the SDGs through their
products and services.
MATERIALITY ASSESSMENT
Materiality assessment, often referred to as materiality determination exercises, are an essential
aspect of the sustainability reporting processes. In essence, materiality assessment means the
identification of the most significant sustainability issues for reporting purposes — ideally from
the perspective of both the organization and its stakeholders. While sounding rather
straightforward in the first instance, such assessments can prove highly challenging It is
important to note that the materiality considerations related to sustainability disclosures differ
from how the concept is used in financial accounting and reporting, in which information and
items are considered material if they could potentially influence the economic decisions of those
using the information.

In sustainability reporting, materiality is the principle that determines which relevant topics are
sufficiently important that it is essential to report on them. The global standards/frameworks for
reporting sustainability presented in the introduction (GRI, SASB, IIRC and TCFD) propose
different but related definitions of materiality, which focus on the following elements:

 Significant economic, environmental, and social impacts of the organization.

 Information that substantively influence the assessments and decisions of stakeholders,
including investors.
 Matters that substantively affect the organization’s ability to create value over the short,
medium, and long term.

A topic may be considered material if it falls into any of the following:

1. It is a key capital/risk/opportunity that impacts value creation
2. Your key business activities impact the topic
3. Your subsidiaries/contractors/supply chain contributes significant impacts to this topic
4. Your product/services contribute impacts to this topic
5. There is a trend that points to a future where this topic will become material to you

The assessment of materiality associated with sustainability issues should consider their
influence on the stakeholders’ assessments and decisions and the significance of the company's
economic, social and environmental impacts. This can be analyzed and reported using a
materiality matrix (shown below) that ranks the importance of sustainability issues based on the
significance of the impact on the company and its stakeholders.

However, these can vary as some matrices include a consideration of the amount of control that
the organization has on an issue. So, while an issue might be seen as important to the
stakeholders (e.g., financial literacy in relation to a financial organization) the issue might be
determined to have low materiality due to the organization (in this case a bank) having, or
considering themselves to have, little control or impact on the issue itself. It is important to
consider what dimensions are included when looking at an organization’s materiality matrix as
they do make a difference to what is considered material and what may be reported.

MANAGEMENT APPROACH
Disclosures should also be accompanied by a management approach which describes the
management of material sustainability issues. This includes explaining how the organization (1)
avoids, mitigates, or remediates negative impacts to the economy, environment, and society, and
enhances positive ones, and (2) addresses its climate-related issues. The management approach
also includes an assessment of material risks and opportunities associated with sustainability,
management and oversight of such opportunities and risks at the highest level of the organization
and performance assessment, using key performance indicators. These approaches can be in the
form of organization policies, commitments, goals and targets, responsibilities, resources,
grievance mechanisms as well as processes, projects, programs, and initiatives. See GRI 103 for
more guidance on the management approach.

Reporting organization should report on the management approach for each material issue with
the following information:

a) An explanation on the materiality of the topic.

b) Theboundaryforthematerialtopic,whichincludesadescriptionofwheretheimpacts occur, and
the organization’s involvement with the impacts.
c) An explanation of how the organization manages the topic and the objectives.

Management Approach Components

When reporting on the management approach for a material topic, the reporting organization
should ideally include a description of the following components, when applicable:

a) Policies – summary or link to the publicly available policies relevant to the topic.
b) Commitments - Intent of the organization to manage the impacts related to the topic (e.g.,
for regulatory compliance, compliance with international standards)
c) Goals and targets — Highlights of the following: (i) baseline and context; (ii) expected
result (quantitative or qualitative); and (iii) expected timeline for achieving each goal and
target.
d) Responsibilities — Assigned responsibility for managing the topic and whether the
responsibility is linked to performance assessments or incentive mechanisms.
e) Resources – Financial, human, or technological resources allocated for managing the
topic.
f) Grievance mechanisms - Highlights of the following: (i) purpose of the mechanism;
(ii)activities covered by the mechanism; (iii) how the mechanism is managed; (iv)
process to address and resolve grievances, including how decisions are made; and (v)
effectiveness criteria used.
g) Specific actions, such as processes, projects, programs and initiatives - May include
actions that aim to avoid, mitigate, or remediate the negative impacts relative to chosen
topic; and whether actions take international norms/standards into account.