Which Sustainability Reporting Standard Should You Use?

Which Sustainability Reporting Standard Should You Use?

Sustainability reporting provides organizations with a framework for disclosing their environmental, social, and governance (ESG) performance, as well as the risks associated with these areas.

When a company decides to prepare a sustainability report, it encounters several standards, including GRI, the ISSB's IFRS S1 and IFRS S2 standards, the Turkish Sustainability Reporting Standards (TSRS), and the European Sustainability Reporting Standards (ESRS).

All these standards are used to disclose sustainability-related information, but they are designed to address different needs. Some focus on an organization's impacts on the environment and society, while others emphasize how sustainability-related issues may affect the organization's financial position and future prospects.

Before selecting a reporting standard, companies should answer the following questions:

1. Is sustainability reporting legally mandatory? Which country's requirements must the report meet?
2. Who is the report intended for: investors or a broader group of stakeholders?
3. Which impacts, risks, and opportunities does the company need to disclose?
4. Are customers, investors, or financial institutions requesting reporting in accordance with a specific standard?

Sustainability Reporting Regulations in Türkiye (TSRS)

Mandatory reporting under the Turkish Sustainability Reporting Standards (TSRS) is determined according to the scope of application established by the Public Oversight, Accounting and Auditing Standards Authority (KGK).

Excluding banks, sustainability reporting under TSRS is mandatory for companies that exceed at least two of the following thresholds for two consecutive reporting periods: total assets of TRY 1 billion, annual net sales revenue of TRY 2 billion, and 500 employees. Certain financial institutions subject to Capital Markets Board (SPK) or Banking Regulation and Supervision Agency (BDDK) regulations are also covered.

Companies that are not subject to mandatory TSRS reporting may also report voluntarily, depending on their needs.

Companies Connected to the European Union (ESRS)

The European Sustainability Reporting Standards (ESRS) are the sustainability reporting standards used under the European Union's Corporate Sustainability Reporting Directive (CSRD).

ESRS covers topics such as the environment, climate, biodiversity, resource use, employees, the value chain, human rights, and business ethics. Both the impacts of a company's activities on people and the environment and the financial effects of sustainability-related matters on the company are assessed. This approach is known as double materiality.

A company operating in Türkiye does not automatically fall within the scope of the CSRD simply because it sells products to the EU. However, the company may be covered by the relevant regulations if it is part of an EU-based group, meets the applicable scope criteria, or receives data requests from its customers. Therefore, its legal structure, group relationships, markets of operation, and the regulations in force for the relevant reporting period should be assessed together.

Voluntary Reporting (GRI)

The absence of a legal reporting requirement does not mean that sustainability reporting is unnecessary. Even when there is no legal obligation, the GRI Standards can be a suitable option for companies that want to provide all their stakeholders with a comprehensive, structured, and comparable account of their environmental and social impacts.

The Global Reporting Initiative (GRI) Standards are used to report an organization's significant impacts on the economy, the environment, and people. Topics such as human rights, working conditions, energy, emissions, water, waste, and business ethics can be included depending on the company's activities and the material topics identified.

GRI offers a modular framework that is not limited to a specific type of company and can be used by organizations of different sizes and across different sectors. Under the GRI approach, the significance of these topics is assessed based on the impacts an organization has or could have. As a result, GRI reports can be useful not only to investors but also to employees, customers, suppliers, public authorities, and other stakeholders.

ISSB / IFRS Sustainability Disclosure Standards

IFRS S1 and IFRS S2 are designed to help companies disclose sustainability-related risks and opportunities that could affect their financial value, particularly for investors and providers of finance in global capital markets. IFRS S1 sets out general requirements for sustainability-related financial disclosures, while IFRS S2 focuses specifically on climate-related disclosures.

Türkiye was among the countries that formally incorporated the IFRS S1 and IFRS S2 standards, issued by the International Sustainability Standards Board (ISSB), into its national regulatory framework at an early stage. The Public Oversight, Accounting and Auditing Standards Authority (KGK) adopted these global standards in Turkish as the Turkish Sustainability Reporting Standards (TSRS).

Which Sustainability Reporting Standard Is Right for Your Company?

• If your company is subject to mandatory reporting in Türkiye: First, check whether your company falls within the scope of TSRS and review the relevant KGK regulations.

• If you want to provide a more comprehensive account of your company's environmental and social impacts: The GRI Standards may offer a suitable framework.

• If your company falls within the scope of the EU's CSRD, or receives reporting requests from customers: Identify the ESRS requirements applicable to the relevant reporting period.

• If investors want information about sustainability-related risks and opportunities: The ISSB approach, particularly IFRS S1 and IFRS S2, can help determine the disclosures needed. TSRS requirements should also be assessed separately when considering mandatory reporting in Türkiye.

Choosing a sustainability reporting standard is not simply a matter of selecting the best-known or most comprehensive framework. Companies should first identify their legal obligations, the intended audience for the report, and the information they need to disclose.

GRI is used to report an organization's impacts on the environment and society; ISSB and TSRS focus on financially material sustainability-related information; and ESRS supports reporting under the EU's CSRD framework using a double materiality approach. Determining which standard is appropriate for your company requires a combined assessment of reporting needs, data infrastructure, and applicable regulations.

At Sistem Grup, we support businesses with sustainability reporting, materiality assessments, data collection, and reporting preparation.

Contact us to determine the sustainability reporting approach best suited to your company.