Turkish Sustainability Reporting Standards (TSRS) And Scope Of Application Of TSRSs Were Puslished In The Official Gazette 12 January 2024

In the Official Gazette dated 29.12.2023 and numbered 32414, the Public Oversight, Accounting and Auditing Standards Authority (POA) announced the Turkish Sustainability Reporting Standards and determined the principles to be followed in sustainability reports.

In the published POA Decision, General Provisions on Disclosure of Sustainability-Related Financial Information were included under the title of TSRS 1 and Climate-related Disclosures were included under the title of TSRS 2.

Pursuant to the Board decision, institutions, organisations and businesses, excluding banks, that exceed the equal values of at least two of the following criteria in at least two consecutive reporting periods are obliged to comply with TSRS in the preparation of their sustainability reports:

  • Total Assets 500 million TL
  • Annual net sales revenue of TL 1 billion
  • Number of employees 250 people

The Decision states that the entity shall report sustainability related disclosures at the same time with the relevant financial statements, and that financial disclosures are generally prepared for a twelve-month period. In this context, it is stated that in determining whether the threshold values are exceeded, the financial statements of the business for the last two years in terms of total assets and annual gross sales will be taken into account while the average number of employees for the last two years in terms of the number of employees will be taken as basis.

We would like to emphasize that, as stated in TSRS 1 text, it may be possible to report for a period longer than twelve months due to application-related reasons. The interim reporting of businesses with publicly issued bonds or stocks may be mandatory, and in this case, paragraph B48 of the TSRS 1 text will be applicable

The headings that should be included in the sustainability report in accordance with the general provisions on reporting can be exemplified as follows:

1. General Provisions (TSRS S1):

  • The company's sustainability strategy and policies.
  • Sustainability-related financial and operational targets.
  • The company's sustainability-related commitments and implementation strategies.

2. Climate-related Disclosures (TSRS S2):

  • Analysis of the company's climate-related risks and opportunities.
  • Environmental performance data such as carbon emissions and energy use.
  • The company's climate-related policies and implementation strategies.

3. Disclosure of Relevant Financial Information (TSRS S1):

  • The company's sustainability-related financial performance data.
  • Financial impacts of social and environmental costs and benefits.
  • The company's sustainability-related financial policies and financial strategies.

4. Explanations on Social and Employee       Rights:

  • Occupational health and safety policies.
  • Employee training and development.
  • Social and economic rights of employees.

5. Environmental and Social Impacts:

  • Natural resource utilisation and environmental impacts.
  • Community engagement and corporate social responsibility (CSR) activities.
  • Impacts on local communities.

6. Management and Internal Control:

  • Internal control mechanisms of the company related to sustainability.
  • Distribution of sustainability-related responsibilities in management.
  • Transparency and reliability of reporting processes.

The text of TSRS 1 requires disclosure of comparative information for all amounts disclosed in an entity's reporting period unless another TSRS permits or requires otherwise.  However, in accordance with the transition period rules under the standards, entities are not required to present comparative information for the first application period and report Scope 3 greenhouse gas emissions for a two-year period.

We would like to bring to your attention that adherence to these sustainability rules is not expressly stipulated as a duty of the board members. Consequently, within scholarly discourse, there exists a deliberation on whether adherence to TSRS rules can be encompassed within the purview of the board members' duty of care.

While the obligation of company executives to consider public interest, human rights, and the environment is controversial, it is clear that, aside from all these, one of the objectives of company executives is to protect the company's interests. Considering that Sustainability reflects the approach of companies to commercial life, these regulations closely concern the diligence obligation of board members.

Under the Board Decision on the Scope of TSRS Implementation, the companies that are within the scope of the Decision and exceed the thresholds in the text of the Decision will be obliged to prepare sustainability reports starting after 1/1/2024 or from the accounting periods later on.

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