The Corporate Sustainability Reporting Directive (CSRD) of the European Union (EU) and the standards of the International Sustainability Standards Board (ISSB) play a significant role in sustainability reporting. In this blog post, we will examine the differences between CSRD and ISSB, the development of sustainability legislation in the EU and Turkey, and Turkey’s stance on this issue. We will focus on the implementation of CSRD, the EU’s efforts to align with other international reporting systems, and the approach of Turkey’s Public Oversight Authority (KGK) towards these standards.

Implementation and Development of CSRD

CSRD came into effect on January 5, 2023, and has been in force for over a year. The EU issued a new directive, 2024/1306, to ease the reporting obligations and extend deadlines for firms and SMEs based outside the EU that do business with the EU. This new regulation aims to alleviate the heavy obligations on firms. However, the process may still be complex and challenging for firms encountering this type of reporting for the first time.

CSRD and Other International Reporting Systems

In drafting CSRD, the EU aimed to ensure as much compatibility as possible with other international reporting systems (GRI, ISSB, etc.). The directive states:

“The Union standards shall take into account any sustainability reporting standard developed under the auspices of the International Financial Reporting Standards Foundation…”

In line with this goal, the EU is currently engaged in intensive cooperation with ISSB and EFRAG (European Financial Reporting Advisory Group). Collaboration is also underway with GRI. A meeting was held on May 24 to discuss how these two reporting frameworks aim to align with each other. While full alignment has not yet been achieved, progress is being made, and we will see the reflections of these developments in the coming days.

What is the Situation in Turkey?

While these developments are taking place in the EU, Turkey’s Public Oversight Authority (KGK), which is the authorized institution on this issue, has published TSRS 1 (financial disclosures) and TSRS 2 (climate-related disclosures, carbon footprint, etc.) standards. Turkey based these standards not on CSRD but on ISSB’s standards and incorporated them into national legislation. TSRS 1 corresponds to IFRS S1, and TSRS 2 corresponds to IFRS S2.

Differences Between CSRD and ISSB Standards

There are some fundamental differences between CSRD and ISSB standards. CSRD is mandatory, whereas ISSB is voluntary. However, since KGK has published these standards as legislation, they have become mandatory in Turkey. CSRD has a much broader scope and includes social and governance aspects. ISSB focuses on financial sustainability and climate (environmental) disclosures. In CSRD, you decide what to report through a double materiality analysis. ISSB does not have a double materiality analysis and focuses more on the impact of climate-related risks on the firm’s sustainability.

Turkey does not yet have a clear policy on aligning with CSRD. There does not appear to be any work on CSRD alignment on KGK’s agenda; the focus is more on ISSB.

In conclusion, sustainability legislation continues to evolve and develop in both the EU and Turkey. Therefore, it is crucial to stay updated continuously. At 10k Consulting, we closely monitor all developments in the field of sustainability. We continue to compile current news to keep you informed. To benefit from our consultancy and reporting services in line with your sustainability goals, you can visit our website and follow us on other social media platforms.