SUSTAINABILITY REPORTING STANDARDS IN TÜRKİYE
Public Oversight, Accounting and Auditing Standards Authority (the “KGK”) was given the responsibility to establish and publish the Turkish Sustainability Reporting Standards(“TSRS”) in accordance with international standards with an amendment to Article 88 of the Turkish Commercial Code No. 6102 which was published in the Official Gazette dated 4 June 2022 and numbered 31856.
In line with this regulation, the Board Decision on the Application Scope of the TSRS was issued by the KGK in the Official Gazette dated 27 December 2023, and numbered 32414 (the “Decision”), and it became effective on 1 January 2024. Subsequently, the scope of TSRS has been reduced by amendments (the “Amendment Decision”) which came into effect for accounting periods commencing on or after 1 January 2024. The decision was issued by the KGK on 16 December 2024 and was published in the Official Gazette on 18 December 2024.
As a result, sustainability reporting has become obligatory for the institutions, organizations, and businesses listed below, which are within the scope of this Decision.
This regulation is designed to place Türkiye as a preferred destination for international investments, facilitate access to green finance, and bolster its competitiveness in global capital markets.
In accordance with the Decision, a sustainability report is defined as a report prepared by an entity in line with TSRS, addressing environmental, social, and governance (ESG) matters. This report may be published under various names, such as an integrated report, integrated activity report, management report, and others.
Reporting Obligations
The companies subject to the TSRS shall adhere to its requirements during the accounting periods starting on or after 1 January 2024.
The first sustainability reports shall be made in 2025.
Pursuant to the Decision, institutions, organizations and businesses, that exceed the equal values of at least two of the following criteria in at least two consecutive reporting periods are required to comply with TSRS in the preparation of their sustainability reports:
• Total Assets: TRY 500 million (approx. EUR 13,100,000),
• Annual Net Sales Revenue: TRY 1 billion (approx. EUR 26,200,000),
• Number of Employees: 250 or more.
Banks that are under the supervision of the Banking Regulation and Supervision Agency are obliged to comply with mandatory reporting, regardless of any threshold. Banks under the Saving Deposit Insurance Fund (“TMSF”) are exempted from this requirement.
a. Companies Subject to the Regulation and Supervision of the Capital Markets Board(“SPK”):
• Investment institutions;
• Collective investment institutions;
• Portfolio management companies;
• Mortgage finance institutions;
• Central clearing institutions;
• Central depository institutions;
• Data storage institutions;
• Joint stock companies whose capital market instruments are traded on a stock exchange or other organized markets, or which have a prospectus or issue document with a validity period were previously subject to the TSRS. However, the Amendment Decision has excluded these companies from the scope and now only those companies whose shares are traded on the Istanbul Stock Exchange are required to comply with TSRS.
• Joint-stock companies that issue capital market instruments (other than shares) without being traded on a stock exchange or organized markets, or that issue such instruments for this purpose with a valid issuance document approved by SPK have been excluded by the Amendment Decision. In other words, joint stock companies not trading their securities on a stock exchange or other organized market, but who have issued capital market instruments other than shares without a public offering or hold an issuance certificate approved by the SPK for trading purposes with a valid term for such issuance, are also exempt from TSRS requirements.
b. Companies Subject to the Regulation and Supervision of the Banking Regulation and Supervision Agency (“BDDK”):
• Banks,
• Rating agencies;
• Financial holding companies;
• Financial leasing companies;
• Factoring companies;
• Financing companies;
• Asset management companies;
• Companies that directly or indirectly hold 10% or more of the capital or voting rights of financial holding companies or banks, or that hold shares granting the privilege to appoint members to their boards of directors;
• Savings finance companies.
c. Insurance, Reinsurance, and Pension Companies:
Insurance, reinsurance, and pension companies that operate under the Insurance Law and the Individual Retirement Savings and Investment System Law are subject to the regulation.
d. Other Companies:
Authorized institutions allowed to operate and having shares listed on Istanbul Stock Exchange, precious metals institutions, and companies engaged in precious metal production or trade. According to the Amendment Decision, companies whose shares are traded on markets of İstanbul Stock Exchange, except those whose shares are traded on the Watchlist Market (in Turkish, “Yakın İzleme Pazarı”) and the Venture Capital Market (in Turkish, “Girişim İzleme Pazarı”) for sale to qualified investors of Istanbul Stock Exchange, are included in the related list and they are required to apply TSRS when preparing their sustainability reports.
It has been decided that institutions, organizations, and businesses not included in the above scope may voluntarily apply the TSRS in the preparation of their sustainability reports.
Calculation of Thresholds
In accordance with Article 4, paragraph 3 of the Decision, when determining whether the threshold values have been exceeded, the amounts in the financial statements prepared in accordance with the applicable regulations will be used for total assets and annual net sales revenue.
For the number of employees, the average number of employees for the last two years will be taken into account.
As per Article 4, paragraph 4 of the Decision, for the calculation, subsidiaries and affiliates will also be considered. The total assets and annual net sales revenue figures of subsidiaries will be consolidated with the parent company’s corresponding amounts, after eliminating intercompany transactions. For the number of employees, the average number of employees for the last two years for both the parent company and the subsidiary will be used. In the case of affiliates, the relevant figures for the affiliate will be considered in proportion to the company’s shareholding in the affiliate.
Exemption from Reporting Obligation
As per Article 4, paragraph 2 of the Decision, businesses will be exempt from the reporting obligation in the following situations:
• if, for two consecutive accounting periods, they fall below the threshold values of at least two of the three metrics, or
• if in one accounting period, they fall below at least two of these metrics by 20% or more.
Transitional Period Provisions
As per Transitional Article 1 and 2 of the Decision, in the first period of applying the TSRS, it is not mandatory to present comparative information, and flexibility has been provided in terms of time for these businesses. Businesses will be able to report their sustainability reports for the first annual reporting period in which they apply the TSRS after publishing their financial reports for the relevant period.
In this context:
• Those subject to interim financial reporting can choose to make interim reports at the second quarter or six-month interim reporting date.
• If interim reporting is not done at the same time as the second-quarter or six-month interim general-purpose financial reporting, reporting can be made within nine months from the end of the first annual reporting period in which the TSRS is first applied, starting from the end of the reporting period.
Additionally, according to Transitional Article 3 of the Decision, the disclosure of Scope 3 greenhouse gas emissions will not be mandatory in the first two annual reporting periods of applying the TSRS.
Reporting Content
The sustainability reports must cover environmental, social, and governance (ESG, in Turkish, “Çevresel, Sosyal ve Yönetişim”) impacts, including:
• Environmental: Energy consumption, carbon emissions, waste management, and natural resource usage,
• Social: Workforce practices, human rights policies, and community contributions,
• Governance: Management structure, ethics, transparency, and internal controls.
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