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Turkiye: Recent Developments in Sustainability Reporting under Turkish Law

Turkiye: Recent Developments in Sustainability Reporting under Turkish Law

Issue 11.4
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Due to the importance of disclosure of compliance with sustainability principles in evaluating the performance of companies, to ensure transparency, comparability, and reliability of the disclosures made within the scope of environmental, social, and governance (ESG) considerations, regulations have been introduced in the Turkish legal system.

In terms of the Turkish capital markets law, the Corporate Governance Communique Numbered II-17.1 (CGC) was amended on October 2, 2020, and the Sustainability Principles Compliance Framework (Compliance Framework), which was prepared by the Capital Markets Board (CMB), was adopted. With this amendment, it has been regulated that publicly traded companies that meet the criteria specified in the CGC are subject to sustainability principles and the relevant companies will include the disclosures within the scope of the Compliance Framework in their compliance reporting with corporate governance principles. In this context, relevant companies are obliged to explain whether the sustainability principles are applied or not, and if not, the reason for not complying with the sustainability principles.

It is stated that the principles included in the Compliance Framework are the basic principles that publicly traded companies are expected to disclose while carrying out their ESG activities. Accordingly, it is regulated that publicly traded companies regulated under the CGC will include the Compliance Framework starting from the annual reports of 2021, including data from 2020. For the companies that apply/applied to the CMB for an initial public offering of their shares and/or commencement of trading on the stock exchange, the Compliance Framework will be included in the annual reports of the relevant year, including the data for the year following the year in which the shares of the companies started to be traded on the stock exchange. The Compliance Framework regulates (a) strategy, policies and objectives, implementation or monitoring, and reporting and verification under the heading of general principles; (b) environmental principles; (c) human rights and employee rights, stakeholders, international standards, and initiatives under the heading of social principles; and (d) the issues to be complied with and/or disclosed regarding corporate governance principles under articles of the framework.

According to the CMB’s Board Decision Numbered 34/977 dated June 23, 2022, the disclosures required to be made within the scope of the Compliance Framework by the companies whose shares are traded on the BIST Main Market (Ana Pazar), BIST Stars Market (Yildiz Pazar) and BIST Sub-Market (Alt Pazar) shall be made using the Sustainability Report Template (Template) which has been published by the CMB on the Public Disclosure Platform to be used starting for the year 2022. In the related decision, it is underlined that compliance with sustainability principles is voluntary, and it is stipulated that by using the Template, annual financial reports should be reported within the notification period and in any case at least three weeks before the date of the general assembly meeting. Including the Template in the annual reports is not mandated by the CMB – it is left to the discretion of the companies. The relevant Template has been prepared in parallel with the headings regulated in the Compliance Framework.

Apart from the CMB’s regulations, as a general regulation, with the amendment to the Turkish Commercial Code Numbered 6102, the Public Oversight, Accounting and Auditing Standards Authority (POA) was authorized to determine and audit the Turkish Sustainability Reporting Standards (TSRS). It is stated that the purpose of the TSRS is to ensure unity of practice and international validity of sustainability reporting and the TSRS will follow international standards. In this context, the POA has issued the TSRS 1 General Provisions on Disclosure of Sustainability-Related Financial Information and the TSRS 2 Climate-Related Disclosures. In addition, the POA has issued two assurance auditing standards and a guideline to provide assurance audits on sustainability reports.

In the announcement published by the POA, it is regulated that banks will be included in the scope of the TSRS without any criteria, while other companies will be included in the scope of the TSRS based on their total assets, annual net sales revenue, and number of employees, and they are obliged to prepare a sustainability report from the year 2024.

By Hulya Kemahli, Partner, and Zeynep Berin Manavgat, Associate, CMS Turkiye

This article was originally published in Issue 11.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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CMS Sofia is a full-service law firm, the largest international law firm in Bulgaria and one of the largest providers of legal services in the local market as a whole. The breadth and depth of our practice means that our lawyers are specialised, with a level of specialisation that few of our competitors can match.

CMS Sofia is the Bulgarian branch of CMS, a top ten global legal and tax services provider with over 5000 lawyers in 43 countries and 78 offices across the world.

CMS entered the Bulgarian market as one of the first internationally active law firms in 2005 and is now among the most respected legal advisors in the country. We have 7 partners, 4 counsel and over 30 lawyers in our office in Sofia.

Our legal experts, who are rooted in Bulgaria’s local culture, can also draw on years of experience in foreign countries and are at home in several legal systems at once. We know the particularities of the local market just as well as the needs of our clients and combine both to achieve optimum solutions. Our lawyers are Bulgarian qualified and we also have English qualified experts – all of them regularly working on cross-border mandates.

In our work, we focus on M&A, Energy, Projects and Construction, Banking and Finance, Real Estate, Media, IP and IT law, Tax, Employment law, Competition, Procurement and any kind of Dispute resolution, including arbitration and mediation. What’s more, we also take care of the entire legal management of our clients’ projects.

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