
Sustainability has become an increasingly important concept in the business world. Investors, consumers, and other stakeholders are focusing not only on a company's financial performance but also on its environmental, social, and governance (ESG) performance. In this context, the Turkish Sustainability Reporting Standards (TSRS) are initiating a profound change in the business world by ensuring companies report their sustainability performance transparently, consistently, and in a comparable format.
What is TSRS?
The Turkish Sustainability Reporting Standards (TSRS) are regulations developed to ensure that companies report their sustainability and environmental impacts transparently and in a standardized format. Developed in line with international practices, these standards enable companies to measure and share their non-financial performance with stakeholders.
Why Did TSRS Become Mandatory?
The mandatory implementation of TSRS can be explained by the following key reasons:
- Compliance with the European Green Deal: Companies need to report their sustainability performance to access the EU market and gain a competitive advantage.
- Transparency and Accountability: Investors and consumers prefer companies that are sensitive to environmental and social issues.
- Reducing Financial Risks: Carbon pricing and other climate policies may impose financial pressure on companies, making it crucial to anticipate and manage these risks.
Key Objectives and Scope of TSRS
The primary goal of TSRS is to provide reliable and transparent information about companies' sustainability performance, helping stakeholders make informed decisions. These standards require companies to report comprehensively on their performance in the following areas:
- Environmental Performance: Issues such as climate change, energy, water, waste management, biodiversity, and natural resource use.
- Social Performance: Topics like labor rights, occupational health and safety, societal contributions, human rights, and supply chain management.
- Governance Performance: Issues related to corporate governance structure, ethical values, risk management, internal control systems, and stakeholder engagement.
Who is Required to Comply with TSRS?
The obligation to comply with the Turkish Sustainability Reporting Standards (TSRS) applies only to certain businesses. Businesses specified in the relevant decision of the Capital Markets Board (CMB) are obligated to make sustainability reporting within the scope of TSRS if they meet the specified financial criteria.
Source: Public Oversight, Accounting and Auditing Standards Authority
- Enterprises subject to the regulation and supervision of the Capital Markets Board:
- Investment institutions
- Collective investment schemes
- Portfolio management companies
- Mortgage finance institutions
- Central clearing organizations
- Central depository institutions
- Data storage organizations
- Joint stock companies whose capital market instruments are traded on the stock exchange or other organized markets
- Joint stock companies issuing capital market instruments other than shares without a public offering
- Enterprises subject to the regulation and supervision of the Banking Regulation and Supervision Agency (BRSA):
- Banks
- Rating agencies
- Financial holding companies
- Financial leasing companies
- Factoring companies
- Financing companies
- Asset management companies
- Companies holding qualified shares in financial holding companies and banks
- Savings finance companies
- Businesses operating in the insurance and private pension sector:
- Insurance companies
- Reinsurance companies
- Pension companies
- Businesses operating in Borsa Istanbul markets:
- Authorized establishments
- Precious metals brokerage houses
- Companies engaged in the production or trade of precious metals
In order to be subject to the reporting obligation under TSRS, the above-mentioned entities must meet at least two of the following three criteria for two consecutive calendar years:
- 250 or more employees
- TL 500 million or more in total assets
- 1 billion TL or more in annual sales revenue
Benefits of TSRS for Companies
Compliance with TSRS provides various benefits for companies:
- Increased Transparency and Accountability: Reporting sustainability performance transparently builds trust with stakeholders and enhances the company's reputation.
- Improved Risk Management: TSRS helps companies better understand and manage ESG risks, supporting long-term sustainability.
- Competitive Advantage: Companies that effectively report their sustainability performance gain a competitive edge among investors and consumers, securing a stronger market position.
- Contribution to Financial Performance: Research shows that companies with high sustainability performance are also financially more successful, indicating potential for long-term profitability growth.
- Compliance with International Standards: TSRS facilitates alignment with international sustainability reporting standards, strengthening the company's ability to compete in global markets.
TSRS Compliance Process
The compliance process with TSRS involves several steps that companies need to follow to report their sustainability performance transparently and consistently.
- Preparation and Planning:
- Training and Awareness: Conduct in-house training on TSRS standards to raise employee awareness.
- Current Status Analysis: Assess the company’s existing sustainability practices and data collection processes.
- Compliance Strategy Development: Develop a strategy to comply with TSRS requirements and establish a project team.
- Data Collection and Management:
- ESG Data Collection: Collect the environmental, social, and governance data required by TSRS, such as energy consumption, water use, waste management, employee satisfaction, and supply chain data.
- Data Management System Setup: Establish a data management system to regularly store, analyze, and report the collected data.
- Data Accuracy and Reliability: Implement necessary controls to ensure the accuracy and reliability of the collected data.
- Reporting:
- Reporting Framework Selection: Choose a reporting framework that aligns with TSRS standards.
- Report Preparation: Prepare a sustainability report using the collected data that meets TSRS requirements.
- Report Review and Approval: Have the report reviewed and approved by internal authorities.
- Verification and Auditing:
- Independent Verification: Obtain verification services from an independent audit firm to enhance the reliability of the report.
- Identifying Areas for Improvement: Evaluate areas for improvement identified during the verification process and make necessary adjustments.
- Stakeholder Communication:
- Publishing the Report: Publish the prepared sustainability report on the company’s website and other communication channels.
- Stakeholder Feedback: Collect feedback from stakeholders and continuously improve the report.
- Stakeholder Dialogue: Regularly communicate with stakeholders to understand their expectations and shape reporting accordingly.
Important Considerations:
- Timeline: Develop a realistic timeline for the TSRS compliance process and adhere to this schedule.
- Resource Allocation: Allocate sufficient human and financial resources for the TSRS compliance process.
- Continuous Improvement: Continuously review and improve the TSRS compliance process.
Challenges in Implementing TSRS and Suggested Solutions
Implementing TSRS may present some challenges for companies, such as the complexity of data collection processes, lack of required expertise for reporting, and managing stakeholder expectations. To overcome these challenges, companies can consider the following solutions:
- Establish Data Management Systems: Set up robust data management systems to collect, store, and analyze ESG data.
- Training and Capacity Building: Provide training for employees on TSRS and sustainability reporting topics.
- Stakeholder Dialogue: Regularly communicate with stakeholders to understand their expectations and shape the reporting process accordingly.
- Leverage Technology: Use software and tools specifically developed for sustainability reporting to streamline data collection, analysis, and reporting processes.
Frequently Asked Questions (FAQ)
- How often should TSRS reporting be done?
TSRS follows an annual reporting frequency. Companies are required to report their sustainability performance every year.
- What data sources can be used for TSRS reporting?
Internal company data, supply chain data, sector-specific data, and national/international databases can be used.
- How are TSRS reports verified and audited?
Reports are verified and audited by independent audit firms, which increases their reliability and accuracy.
- What technologies can be used for TSRS reporting?
Specialized software and data management systems for sustainability reporting can be used. These technologies simplify data collection, analysis, and reporting processes.
- Which stakeholders should be communicated with for TSRS reporting?
Communication should be established with stakeholders such as investors, customers, employees, suppliers, NGOs, and public institutions. Stakeholder feedback improves report quality and enhances the company's sustainability performance.