Sustainability Report Regulations for Companies in Turkey

Sustainability Report Regulations for Companies in Turkey

1.Introduction

Turkey Sustainability Reporting Standards and "Board Decisions Regarding the Scope of Application", which are fully compatible with the global S1 and S2 sustainability reporting standards of the International Sustainability Standards Board, were published in the Official Gazette No. 32414 dated 29 December 2023.

Sustainability Reporting is a report prepared in accordance with the Turkey Sustainability Reporting Standards concerning an organization's environmental, social, and governance aspects.

This report assesses and evaluates the organization's economic, environmental, and social performance, along with the extent to which they have achieved sustainability goals, how they have fulfilled commitments in this area, and the steps they plan to take in the future.

The report in question elaborately showcases how the business performs in terms of its environmental impact, social responsibility practices, employee rights, supply chain management, and many other areas.

2. Companies Required to Prepare Sustainability Reports

According to the decision regarding the application of Turkey Sustainability Reporting Standards;

1-) Companies that are subject to the regulation and supervision of the Capital Markets Board;

            (a) Investment Institutions

            (b) Collective Investment Institutions

            (c) Portfolio Management Companies

            (d) Mortgage Finance Institutions

            (e) Central Settlement Institutions

            (f) Central Depository Institutions

            (g) Data Storage Organizations

            (h) Joint stock companies whose capital market instruments are traded on a stock exchange or other organized markets or have a prospectus or issue document with a validity period approved by the Capital Markets Board for the purpose of trading

            (ı) Joint stock companies that are not traded on a stock exchange or other organized markets but issue capital market instruments excluding shares without being offered to the public (until the end of the accounting period in which the capital market instruments they issue are redeemed) or have an issue document with a validity period approved by the Capital Markets Board for this purpose

2-) In accordance with the Banking Law, businesses subject to the regulation and supervision of the Banking Regulation and Supervision Agency;

                        (a) Rating Agencies

                        (b) Financial Holding Companies

                        (c) Financial Leasing Companies

                        (d) Factoring Companies

                        (e) Financing Companies

                        (f) Asset Management Companies

                        (g) Companies that have qualified shares in Financial Holding Companies and Banks

                        (h) Savings Financing Companies

3-) Insurance, reinsurance and pension companies operating within the scope of the  Private Pension Savings and Investment System Law

4-) Authorized institutions, precious metals brokerage institutions, companies engaged in the production or trade of precious metals that are allowed to operate on the Borsa Istanbul Markets

Are entitled to prepare Sustainability Report if they exceed the threshold values of at least two of the following criteria in two consecutive reporting period from 01/01/2024;

•          Total Assets are 500 million Turkish Liras

•          Annual net sales revenue is 1 billion Turkish Liras

•          The number of employees is 250 people

Banks excluding the banks who are included in the Savings Deposit Insurance Fund are entitled to prepare Sustainability Report without being subject to any threshold value.

3. Application Regarding Subsidiaries and Affiliates

In determining whether the threshold values are exceeded, companies are taken into account together with their subsidiaries and affiliates. In the companies with subsidiaries and affiliates;

a. The sum of the items included in the financial statements of the parent company and the subsidiary in terms of the total assets and annual net sales revenue (if any, intra-group transactions are eliminated)

b. In terms of the number of employees, the sum of the average number of employees of the parent company and the subsidiary for the last two years is taken into account.

From the point of view of subsidiaries, these items belonging to the subsidiary are taken into account in the ratio of the entity's shares in the subsidiary.

4.Conclusion       

As a result of the decision published in the Official Gazette dated December 29, 2023, and numbered 32414, sustainability reporting has become mandatory for the businesses mentioned above.

Although it is not mandatory, enterprises located outside the scope will also be able to conduct reporting in accordance with Turkish Sustainability Reporting Standards on a voluntary basis.

References

1. Official Gazette dated December 29, 2023, and numbered 32414

2. The announcement regarding the Turkey Sustainability Reporting Standards dated 08.01.2024 by the Ministry of Commerce