What is TSRS?

TSRS(Turkish Sustainability Reporting Standards) are a set of reporting standardspublished in 2023 by Turkey's regulatory authority, the Public Oversight Authority (POA). These standards were developed based on the EU's ESRS (European Sustainability Reporting Standards) and ISSB (International Sustainability Standards Board) standards to ensure that Turkish companies remain globally competitive and transparent in their ESG (Environmental, Social, Governance) disclosures.

Why was TSRS developed?

The development ofTSRS reporting standards was driven by Turkey's imperative to respond to external pressures as an economy integrated into international trade and investment flows.

Global Harmonization: TSRS aims to ensure that companies meet sustainability standards and remain competitive in the face of challenges from international markets, such as the EU Green Deal and the Border Carbon Adjustment Mechanism (CBAM).

Transparency: The TSRS is designed to ensure that Turkish companies make transparent ESG disclosures that meet the expectations of global investors.

Who is Covered by the TSRS? Which Companies Must Comply with the TSRS?

The obligation to comply with theTSRS will start in 2024.

Large Turkish companies and financial institutionsthat meet certain size criteria are required to submit a sustainability report in accordance with the TSRS.

Borsa Istanbul also expects listed companies to publish TSRS-compliant reports.

How does the TSRS Work? Which Areas to Report on?

The TSRS requires companies to report in four main sustainability-related areas. These areas are structured similarly to the ISSB's IFRS S1(tsrs 1) and IFRS S2(tsrs 2) standards:

Governance: How sustainability risks are overseen by the board.

Strategy: How climate-related risks and opportunities are integrated into corporate strategy.

Risk Management: How sustainability-related risks (e.g. physical climate risks, regulatory costs) are identified, assessed and managed.

Metrics & Targets: Specific KPIs and targets to measure environmental, social and governance performance.

TheTSRS reporting process explicitly requires the board to approve sustainability strategies and disclosures.

What are the differences between TSRS and EU CSRD and ESRS?

In its development, theTSRS was closely modeled on both the EU's CSRD/ESRS standards and the ISSB standards.

How Should Businesses Prepare for the TSRS Process?

Businesses need to increase their internal capacity to comply with the TSRS. In the overall sustainability roadmap, this preparation takes place from the most basic level onwards:

Building Data Capacity: Companies build ESG data collection capacity and make it reliable using carbon accounting software.

MRV (Monitoring, Reporting, Verification) System Setup: Standardizing facility emission inventory and making it ready for verification processes with modules such as Corporate Carbon Footprint Calculation (ISO 14064-1 compliance).

Governance Integration: Board of directors to take on sustainability oversight.

Strategic Expansion: TSRS requirements enable the transition from meeting legal requirements such as CBAM (Priority 1) to the necessary steps (GRI Reporting, Product Footprint) for competitive advantage and corporate transparency (Priority 3).

How is the TSRS Report Prepared? What are the Sections?

TheTSRS report requires an integrated approach that aims to present sustainability information alongside financial statements with the same rigor as required by the ISSB standards on which the TSRS is based.

Scope: The TSRS should include sections that focus primarily on governance, strategy, risk management, metrics and targets.

Approval: TSRS emphasizes the importance of governance by requiring the board to approve sustainability strategies and disclosures as a legal requirement.

What are the Challenges in Transitioning to TSRS Compliance?

Companies in Turkey may face several challenges when transitioning to new reporting standardssuch as TSRS:

Lack of Resources and Information: As in developing countries, Turkish companies may lack resources and knowledge to implement sustainability initiatives.

Costs: The costs of complying with new reporting standardsand the need for skilled personnel for ESG management are significant concerns.

What are the Benefits of TSRS for Businesses?

Complyingwith TSRS reportingoffers strategic benefits for businesses beyond legal compliance:

International Competitiveness: IFRS has become a necessity for Turkish companies to remain competitive in the global market. Compliance with EU standards provides advantages in attracting foreign investment and access to EU markets.

Access to Finance: A high ESG score or TSRS compliance can facilitate companies' access to green financing sources with lower cost of capital.

Governance and Trust: Companies with a sustainability committee on the board are more likely to publish a sustainability report. The transparency mandated by the TSRS strengthens stakeholder trust and reputational capital.

Frequently Asked Questions (FAQs)

When will the TSRS become mandatory?

as of 2024, large Turkish companies and financial institutions that meet the size criteria will be required to submit a sustainability report in accordance with the TSRS.

Are TSRS and ESG reporting the same thing?

TSRS(Turkish Sustainability Reporting Standards) are a set of formal reporting standardsthat cover environmental, social and governance (ESG) factors and standardize the reporting of these factors. The purpose of TSRS is to provide transparency in ESG disclosures.

Do SMEs have to comply with the TSRS?

Sources indicate that the obligation starts for large Turkish companies and financial institutions that meet certain size criteria. While it is not clear whether SMEs are legally covered, SMEs exporting to the EU are indirectly obliged to report plant emission data (SEE) due to regulations such as CBAM.

Is there a penalty for not preparing a TSRS report?

The available sources do not specify whether not preparing a TSRS report will lead to a direct penalty. However, non-compliant companies risk losing competitiveness in international markets or facing barriers to accessing financing.

What is the link between TSRS and financial reporting?

TheTSRS is complementary to financial reporting. ISSB standards, on which TSRS is based, require sustainability information to be published alongside financial statements and with the same audit rigor. The main objective of TSRS(especially climate-related standards such as tsrs 2 ) is to disclose the impact of sustainability risks and opportunities on corporate value and financial results.

How many times a year is a TSRS report required?

Sources do not provide precise information on the frequency of TSRS reportpublication, but international financial reporting standards and practices generally follow an annual reporting cycle.