ESG and sustainability
Law for a sustainable future
The European Parliament recently approved the Corporate Sustainability Reporting Directive (CSRD), as part of the European Green Deal, which requires a large number of companies to report on sustainability matters, such as environmental and social rights and governance factors. It does this by strengthening the existing rules introduced by the 2014 Non-Financial Reporting Directive with the aim of increasing companies' accountability and transparency in the interests of an easier transition.
The CSRD expands the reporting requirements both in terms of their scope and the companies subject to it. Accordingly, new reporting requirements will apply to all large companies which are public-interest entities with balance sheets exceeding the criterion of an average number of 500 employees during the financial year. This applies to all companies listed on regulated markets except for listed micro-undertakings. The CSRD will also be applied to certain small and medium-sized enterprises, as of 2028.
Previously, the pre-existing rules solely applied to companies within the EU. The new CSRD will apply to all companies with business operations within the EU. Turkish companies meeting the above conditions will need to take into account the new sustainability reporting standards imposed by the EU and implement new procedures in that respect. Please contact us for further details on implementing these procedures.
The Act on Corporate Due Diligence to Prevent Human Rights Violations in Supply Chains (the Supply Chain Act), imposing new obligations in terms of respecting human rights to certain German companies and their suppliers, entered into force on 1 January 2023. The Supply Chain Act will initially apply to companies having their headquarters, central administration, administrative headquarters, branches or statutory seats in Germany and having more than 3,000 employees. As of 2024, companies having more than 1,000 employees on average per fiscal year will also be subject to the Supply Chain Act. As the Supply Chain Act imposes liabilities on German companies and the players in their supply chain, it is expected to have a material effect on an international level. Therefore, Turkish suppliers within a supply chain of a German company may need to adapt their compliance systems to meet with the obligations imposed by the Supply Chain Act.
The companies subject to the Supply Chain Act are expected to identify, prevent and take measures against the risks of adverse human rights impacts in their supply chains worldwide, to ensure the protection of human rights including; applying fair working conditions, prohibiting child labor and forced labor, minding occupational health and safety obligations and keeping their business activities and their supply chains free from modern slavery and comparable abuses which are protected under certain human rights conventions listed under the Supply Chain Act.
Companies failing to comply with the Supply Chain Act may be subject to administrative fines up to Euros 8 million, or for companies having an annual turnover of more than Euros 400 million up to 2% of their annual global turnover. In addition to the administrative fines, certain companies may also be excluded from tenders for public contracts.
Read the full publication, "ESG increasingly a top priority for consumer-facing businesses."
Read the full publication, "ESG disputes in international arbitration."
Read the full publication, "2023 proxy season: ESG remains center stage amid market uncertainty."
The new Regulation on Environmental Noise Control (Regulation) has been published in the Official Gazette, dated 30 November 2022. The Regulation introduces noise control precautions to prevent the negative effects of environmental noise pollution on the environment and on human health, informing the public about actions taken to achieve this. The Regulation covers industrial plants, transportation hubs, music-playing establishments, sea vehicles, construction sites, and includes outdoor activities that may cause environmental noise. The Regulation introduces restrictions, including limits on the period of time over which noise can be made, permission required, and constant monitoring of such activities.
The Regulation introduces the concepts of strategic noise maps, strategic noise action plans, and acoustic reports for detecting, reporting and diminishing environmental noise. Organizations will be obliged to comply with the technical standards and measures set forth under the Regulation. Also, workplaces and sea vehicles streaming music must now apply for consent to stream music, for evaluation by the relevant Provincial Directorate of the acoustic report prepared for such workplaces or vehicles.
An amendment to the Communiqué on the EIA Certificate of Competency (Communiqué) has entered into force in the Official Gazette, dated 31 December 2022 and numbered 32060. The purpose of this Communiqué is to regulate the procedures and principles to be followed by organizations that prepare the project presentation file, environmental impact assessment application file, environmental impact assessment report and project progress report within the scope of the Environmental Impact Assessment Regulation, published in the Official Gazette, dated 29/7/2022 and numbered 31907.
In light of the Amendment, additional criteria were introduced for institutions/organizations operating with the EIA Certificate of Competency. Accordingly, organizations with an EIA Qualification Certificate are required to have a registered electronic mail address (KEP) and to develop a website. Furthermore, (i) organizations with an EIA Qualification Certificate are not allowed to provide services related to the Communiqué to project owners with the same tax number as the EIA Qualification Certificate holder; or (ii) individuals who serve in the management body, representatives or shareholders of an organization holding an EIA Qualification Certificate are not permitted to provide services to project owners in which they serve in any title, or in which they are a shareholder. The Communiqué also includes additional regulations regarding the assignment of personnel and their roles and responsibilities in institutions with an EIA Competency Certificate.
The Regulation of Environment Management Services (Regulation) regulating the provision, quality and quantity of environment management services, including working conditions, consultancy fees of environmental consultancy companies or personnel, is published in the Official Gazette dated 1 November 2022. The Regulation has imposed additional criteria for consultancies operating in this field, such as; an obligation to (i) obtain an Office Compliance Letter confirming compliance with the physical conditions of companies' office before applying for a Competency Certificate; (ii) apply minimum tariffs determined by the Ministry of Environment, Urbanization and Climate Change for environment management services to prevent unfair competition; (iii) employ new graduates; (iv) remedy any lack of environmental compliance within 90 days, depending on the materiality of its impact; and (v) limit the scope of work of personnel vis-a-vis the environmental legislation to raise the quality of the environmental management services.
The Regulation Amending the Regulation on the Principles and Rules to be Implemented in Retail Trade (Regulation) entered into force following its publication in the Official Gazette dated 7 December 2022. In light of the Regulation, retail stores engaged in the sale of fast-moving consumer goods in the food retail sector and having more than 200 branches are obliged to transfer data on the products they offer for sale and their branches to the system determined by the Ministry of Customs and Trade. It is also important to mention that the collected data can be shared with other institutions and to the public as well.
Shipping plays a critical role in facilitating efficient global trade and underpins the international economy: it is estimated that over 80% of world trade is carried by sea.
On March 9, 2023, the European Commission (EC) adopted changes to its State aid framework to support its “Green Deal Industrial Plan for the Net-Zero Age” (the Net Zero Plan) presented in February 2023. The Net Zero Plan is part of the European Green Deal, which aims to make Europe the world’s first climate-neutral continent by 2050.
© Norton Rose Fulbright LLP 2023