A step forward for better ESG practices by Turkish companies
A STEP FORWARD FOR MORE SUSTAINABLE COMPANIES
Enacted on October 1, 2020, the Capital Markets Board of Turkey (“CMB”) amended the Corporate Governance Communiqué with a focus on sustainability compliances of the publicly-traded companies. On a “Comply or Explain” basis, the Companies are expected to comply with the principles and, if they fail to comply, to provide explanations for their failures to do so.
Although the implementation of the principles is voluntary at present, the Companies are expected to report on their sustainability policies, long and short-term plans and performances. Accordingly, public companies are obliged to report under 3 main headings as Environmental, Social and Corporate Governance Principles.
Further, the CMB published the “Sustainability Principles Compliance Framework” to guide public companies on compliance with sustainability principles, including policy-making and disclosure activities.
There have been considerable changes regarding the three topics of Corporate Governance Principles. One of these is the establishment of responsible committees which will enable companies to systematically manage their Environmental Social and Corporate Governance (“ESG”) activities. ESG committees will not only draft the policy and strategies of the Companies regarding sustainability principles, but will also ensure continuous improvement by evaluating the practices as they are enacted.
Structures responsible for the sustainability strategies and performances of companies have started to be established in many countries at present. Some of the benefits of these committees, which are generally referred to as “sustainability committees”, to an organization can include the following (Source:
- Developing innovation and collaboration around the goal of a more sustainable world;
- Increased savings brought about by the decrease in resource use;
- Easier access to financial resources; and
- Attracting a qualified workforce.
For ESG committees in Turkey to function efficiently, transparency and accountability play a crucial role, as they do in all board committees. Committee members are expected to take responsibility for the implementation of these strategies as well as determining the sustainability strategies of the company.
It is also important to emphasize that the board’s risk-related oversight, which is focused on long-term value creation, includes ESG risks (Ramani, Saltman and Ceres, 2019). Accordingly, ESG committees under the board of directors are expected to be equipped with robust risk management tools/skills.
We at Komba welcome this significant step that CMB has taken, which will enhance the sustainability practices and reporting of Turkish companies.
Disclaimer: Opinions expressed within the content are solely the author’s and do not reflect the official opinions and beliefs of the companies that he represents.