Although it is indisputable that companies are organizations that aim to make profit, their impact on the environment and society cannot be ignored while achieving this goal. It is an inevitable fact that companies that only aim for profitability harm the environment and society. In addition to financial performance, sustainability requires companies to evaluate and report their policies on major environmental issues such as environmental pollution, climate change and global warming, as well as issues such as social inequality and human rights violations. A company with sustainable principles is intended to act responsibly towards the environment, future generations and society.
 
Sustainability in International Regulations
 
Preparing the EU legal framework for establishing a duty of care for the environmental and social rights impacts of corporate activities in global supply chains Corporate Sustainability Duty of Care Directive The draft regulation was published by the European Commission on 23.02.2022 and entered into force.
 
The legislation aims to require companies of a certain size operating in the EU to integrate the duty of care into their corporate policies, to identify the social and environmental impacts of their activities, to prevent and mitigate potential negative impacts, to eliminate existing negative impacts and to report them, and to apply the duty of care to their own and their subsidiaries' activities as well as to their value chains.
 
Although small and medium-sized enterprises (SMEs) are not directly covered by the directive, SMEs that are suppliers or sub-suppliers of large companies that are covered may also be affected by the provisions of the legislation.
 
In order for the duty of care to be part of the core activities of companies, companies covered by the directive must make corporate sustainability a part of company policy and assess the impact of decisions on the environment, human rights and social rights.
 
According to the EP position, covered companies should have a transformation plan for their economic activities to limit global warming to 1.5°C in line with the Paris Agreement.
 
In terms of sanctions and oversight mechanisms, it is envisaged that non-compliant companies will be liable for damages and sanctioned by national supervisory authorities; sanctions may include measures such as disclosure, withdrawal of their goods from the market or fines of at least 5% of their worldwide net turnover; and non-compliant non-EU companies will be banned from participating in public tenders in the EU.
 
Sustainability in Turkey
 
The main regulation on sustainability in corporate law is paragraph 6 added to Article 88 of the TCC in 2022. According to the provision, “The Public Oversight, Accounting and Auditing Standards Authority is authorized to determine and publish the Turkish Sustainability Reporting Standards in accordance with international standards in order to ensure unity in practice and international validity of sustainability reporting for the enterprises and organizations it determines. Institutions and boards established by law to regulate and supervise certain fields may make detailed regulations regarding the standards that will be applicable to their fields, provided that they comply with the Turkish Sustainability Reporting Standards.”
 
Another regulation is the Corporate Governance Communiqué (CGCC) published in the Official Gazette dated 03.01.2014 and numbered 28871 and the Corporate Governance Principles (CGP) published in the Official Gazette dated 30.12.2011 and numbered 28158 pursuant to the Capital Markets Law. Although the principle of “comply or explain” prevails in these texts, a limited number of mandatory provisions are included. Mandatory provisions deal with the governance structure of the company and the relationship between the company and the shareholder.
 
One of the important principles related to sustainability is the principle of “public disclosure”, which is addressed under Article 128/1-b of the CML. The relationship between ESG and sustainability is mainly regulated in secondary legislation (CGT and PFD).
 
The Turkish Sustainability Reporting Standards and “Board Decisions on the Scope of Implementation”, which are in full compliance with the International Sustainability Standards Board's global S1 and S2 sustainability reporting standards, were published in the Repeated Official Gazette dated December 29, 2023 and numbered 32414.
 
According to the decision on the implementation of the Turkish Sustainability Reporting Standards, “Sustainability Reporting” has become mandatory as of 01/01/2024 for the companies that exceed the threshold values of at least two of the following criteria in two consecutive reporting periods. 
 
In general terms, the Turkish Sustainability Reporting Standards (TSRS) are standards published by the Public Oversight, Accounting and Auditing Standards Authority (POA) to be used by companies to assess their environmental, social and governance (ESG) performance.
 
The thresholds determined within the scope of TSRS are as follows:
Number of employees: 250 people
Total assets: 500 Million Turkish Lira
Annual net sales revenue: 1 Billion Turkish Lira
 
The harmonization of TSRS with international standards will increase the competitiveness of Turkish businesses in global markets. In addition, these standards will enable investors and other stakeholders to more clearly assess the sustainability performance of companies.
It is a controversial issue whether the liability of the members of the board of directors under Art. 553 of the TCC arises in case of violation of these regulations. In the doctrine, it is attempted to reach a conclusion by interpreting the corporate interest in different ways. In corporate law, continuity is considered in terms of the continuity of the enterprise. While ensuring its own continuity, it is essential that the company does not harm the continuity of society and the environment. It would not be wrong to conclude that the members of the board of directors are also responsible for ensuring this continuity.

Av. Enes Aliş, LL.M.