A New Era in Sustainability Reporting

With the decision of the Public Oversight, Accounting and Auditing Standards Authority (“Authority Decision”) published in the Official Gazette No. 32957 on 16 July 2025, an important step has been taken in sustainability reporting in Turkey, and the “Procedures and Principles Regarding the Scope of Application of Turkey Sustainability Reporting Standards (TSRS)” have come into force.

The primary objective of this regulation is to ensure that businesses are evaluated not only based on their financial performance but also on their environmental, social, and governance (ESG) impacts. This enhances public trust and strengthens Turkey’s alignment with both the EU acquis and the IFRS S1 and S2 standards.

1.           Companies Subject to Mandatory Reporting

According to Article 6 of the Authority Decision, companies required to prepare sustainability reports are those that meet certain threshold criteria:

• 250 or more employees,

• Annual net sales revenue of 1 billion TRY or more,

• Total assets of 500 million TRY or more.

A company must meet at least two of these three criteria to be subject to reporting. This regulation thus covers not only large-scale companies but also medium-sized enterprises with high operational volumes. Additionally, publicly traded companies on the capital market are included in the scope.

2.           Employee Count, Financial Criteria, and Structure of TSRS

When calculating the number of employees, both the company’s own workforce and employees of subsidiaries and affiliates are taken into account. The count is based on annual averages to prevent misleading effects from seasonal fluctuations.

Net sales revenue is calculated based on TFRS financial statements for companies subject to Turkish Financial Reporting Standards (“TFRS”) and on tax law-compliant statements for other companies. This ensures equality among businesses with different accounting frameworks.

TSRS has been prepared based on IFRS S1 and S2 published by the International Sustainability Standards Board (ISSB). TSRS consists of two separate standards: TSRS 1: General Provisions on the Disclosure of Sustainability-Related Financial Information TSRS 2: Climate-Related Disclosures. This dual structure obliges companies to report both general sustainability risks and opportunities as well as specific climate-related responsibilities.

3.           Independent Audit Requirement

One of the most important innovations introduced by the regulation is that sustainability reports are not only prepared but also subject to independent audit. The Authority Decision sets the criteria for entities authorized to audit and ensures the reliability and accuracy of reports through independent verification.

This approach transforms sustainability reporting from a mere disclosure obligation into a binding and reliable practice, preventing misleading or incomplete information and guaranteeing the accuracy of company-reported data, similar to financial statements.

4.           Cases for Exemption from Reporting

According to Article 10 of the Authority Decision, if a company initially subject to reporting meets the threshold criteria but later falls below at least two of these thresholds by 20% or more, it may be exempt from mandatory reporting in the following period.

For example, if by the end of 2026 a company’s total assets or net sales revenue drop below 20% of the threshold, it will no longer be obligated to report in 2027. This provides a dynamic framework, allowing reporting obligations to adjust according to business activity changes.

5.           Importance for Citizens and Investors

The new regulation is significant not only for companies but also for citizens and investors. Companies’ environmental sensitivity, approach to employee rights, and social responsibilities can now be measured with concrete data, enhancing public trust.

For investors, having sustainability data audited independently alongside financial statements creates a more reliable and transparent investment environment. Companies compliant with ESG criteria will be particularly attractive to foreign funds and investors.

6.           Conclusion and Assessment

With the Authority Decision published in the Official Gazette on 16 July 2025, a new reporting era has begun in Turkey. Companies are now evaluated not only on economic outcomes but also on environmental, social, and governance responsibilities, making them accountable to the public.

This step will strengthen Turkey’s alignment with sustainable development goals and the EU acquis, enhance trust in international markets, and, in the long term, increase societal benefit.

Author

Buse Özer