Corporate Sustainability Reporting Directive Turkey

Corporate Sustainability Reporting Directive Turkey: What to Expect in 2025

The European Union's Corporate Sustainability Reporting Directive (CSRD), effective from 2025, will introduce significant changes in corporate sustainability reporting across Europe. This directive will require companies to provide more detailed and transparent reports on environmental, social, and governance (ESG) factors. While primarily targeted at EU-based firms, the CSRD will also affect companies operating in Turkey. In this blog post, we will explore the CSRD, its implications for Turkish businesses, and how they can prepare for these changes.

What is CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is a regulatory framework introduced by the European Union to ensure that businesses provide comprehensive and transparent sustainability reports. The CSRD updates the previous Non-Financial Reporting Directive (NFRD) and broadens its scope. It mandates that companies disclose detailed information regarding their environmental, social, and governance (ESG) practices, risks, and impacts.

The goal of CSRD is to align business activities with the EU’s green and sustainability objectives, ensuring companies contribute to the transition to a sustainable economy. It also aims to improve the comparability, reliability, and accountability of non-financial information, which will be key to investor decision-making.

CSRD’s Impact on Turkish Companies

The CSRD will affect any company operating in the European Union market, which means Turkish businesses with subsidiaries, branches, or customers in the EU, or those listed on EU stock exchanges, must comply with these new regulations.

Some key points to note:

Scope of the Directive: The CSRD will apply to large companies, those that meet two out of three criteria: €40 million in net turnover, €20 million in total assets, or 250 employees. This includes both private and public entities.
Mandatory Reporting: Companies subject to the CSRD will need to report their ESG performance in alignment with European standards and frameworks. This includes carbon emissions, supply chain management, human rights policies, diversity, and corporate governance.
Assurance Requirements: The reports will need to be verified by an independent third party to ensure their accuracy and credibility.

Preparing for CSRD Compliance

For Turkish companies, preparing for CSRD compliance involves several key steps:

Understand the New Reporting Requirements: Familiarize yourself with the detailed reporting requirements and standards specified by the EU. This includes understanding which ESG aspects will need to be reported and how to measure them.
Evaluate Your ESG Data: Ensure that your company collects and manages data relevant to sustainability factors. If you haven’t already, consider implementing systems that track and manage environmental and social metrics, such as carbon emissions, energy consumption, waste management, and employee diversity.
Integrate Sustainability into Business Strategy: CSRD isn't just about reporting; it’s also about integrating sustainability into the core of your business strategy. Ensure that your company has clear goals for improving sustainability practices and that these align with the CSRD’s objectives.
Engage with Stakeholders: The CSRD requires companies to disclose how their sustainability practices affect various stakeholders, including employees, customers, and the broader community. Regular communication with stakeholders will be crucial in providing accurate and relevant reporting.
Hire or Train Experts: Given the complexity of CSRD compliance, it may be necessary to hire experts in sustainability reporting or provide training for internal teams. Having a team that understands the requirements and can handle the data and reporting processes is essential.

The Future of Corporate Sustainability Reporting in Turkey

The introduction of the CSRD will raise the bar for sustainability reporting in Turkey, particularly for companies with international operations or aspirations. Compliance with the directive will not only be a legal obligation but also an opportunity for companies to enhance their sustainability efforts, gain investor trust, and improve their brand reputation.

As sustainability becomes an increasingly important aspect of business operations, Turkish companies that adapt early will be better positioned in the global market. Embracing these changes now will allow businesses to stay ahead of regulatory requirements and contribute meaningfully to the transition towards a sustainable economy.

Conclusion

In 2025, Turkish companies will need to adjust to the European Union's Corporate Sustainability Reporting Directive (CSRD), ensuring that they meet the new standards for sustainability reporting. While this may seem challenging, it also offers companies a chance to demonstrate their commitment to sustainability and improve their corporate reputation. By taking proactive steps today, Turkish businesses can smoothly transition to CSRD compliance and align with the growing global demand for transparent and responsible corporate practices.

By implementing these changes, companies will be able to contribute positively to the sustainable development goals and gain competitive advantages in an increasingly sustainability-conscious world.

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