ESG stands for environmental, social and governance. It is a framework that looks at a company's environmental issues such as climate, water and waste, its relationships with employees and the supply chain, and its governance, from the board of directors to anti-bribery controls, side by side. The term spread through Who Cares Wins, an initiative launched in 2004 by the UN Global Compact, the International Finance Corporation (IFC) and the Swiss Government together with the financial industry.
In Türkiye, ESG is no longer just an investor interest but a reporting obligation. According to the Public Oversight, Accounting and Auditing Standards Authority (KGK), the Turkish Sustainability Reporting Standards (TSRS) have been mandatory for companies in scope for accounting periods beginning on or after 1 January 2024.
In short:
- ESG has three pillars, and which issues matter differs by company, sector and region (Who Cares Wins report).
- In Türkiye the reporting language is TSRS; its climate standard, TSRS 2, follows the international IFRS S2 (KGK).
- The starting point is not a report template but identifying the issues that matter to the company and the data behind them.
What is ESG and what does it stand for?
ESG stands for environmental, social and governance. The final report of the Who Cares Wins initiative, published in 2009, defines the initiative's aim as integrating environmental, social and governance issues into mainstream investment decision-making and ownership practices. Its core conviction is that giving these issues more weight leads to better investment decisions and more resilient markets.
ESG therefore has its roots in finance: the first question was not "what does the company give back to society?" but "how do these issues affect the company's risk and value?" Corporate sustainability is a broader idea; ESG can be seen as the framework that breaks sustainability performance into measurable, reportable topics.
What do the environmental, social and governance pillars cover?
The Who Cares Wins report gives the following examples of issues with a broad impact on companies:
- Environmental (E): risks and opportunities related to climate change and water scarcity; local pollution and waste management; new regulation expanding environmental product liability; new markets for environmental services and products.
- Social (S): workplace health and safety; knowledge and human capital management; labour and human rights within the company and its supply chain; relations with government and local communities.
- Governance (G): board structure and accountability; accounting and disclosure practices, transparency; executive compensation; management of corruption and bribery.
The report makes an important point: which ESG issues matter varies across companies, sectors and regions. For a logistics company fuel and emissions may come first, for a software company data security and skilled people, for a food producer water and the supply chain.
Is ESG reporting mandatory in Türkiye?
According to the source, yes for certain companies. KGK's scope decision, published in the Official Gazette on 29 December 2023, defines a sustainability report as the report a company prepares under TSRS on environmental, social and governance matters. Under the decision:
- Companies in the listed capital markets, banking, insurance and similar sectors apply TSRS if they exceed the thresholds on at least two of three criteria (total assets, annual net revenue, number of employees) for two consecutive reporting periods.
- Banks, except those under the Savings Deposit Insurance Fund (TMSF), are in scope regardless of thresholds.
- Companies outside the scope may apply TSRS voluntarily.
- Comparative information is not required in the first reporting period, and Scope 3 greenhouse gas emissions need not be disclosed in the first two annual reporting periods.
Because thresholds and scope can change through KGK decisions, whether a company is in scope should be checked against KGK's current decisions. This article is not legal advice.
How do TSRS, IFRS S1/S2 and the EU's CSRD relate?
The International Sustainability Standards Board (ISSB) issued IFRS S2, its climate-related disclosures standard, in June 2023. It is effective for annual periods beginning on or after 1 January 2024 and is applied together with IFRS S1, which sets the general requirements. According to KGK's announcement of 30 July 2026, the ISSB's amendments to the greenhouse gas disclosures in IFRS S2 have also been carried into TSRS 2, to be applied for periods beginning on or after 1 January 2027. In short, climate reporting in Türkiye follows the ISSB line.
In the EU the framework is the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS). According to the European Commission, the first companies applied the rules for financial year 2024 and published their reports in 2025. The scope is changing: in February 2025 the Commission proposed applying the CSRD only to the largest companies with more than 1,000 employees, a political agreement on the simplification package was reached in December 2025, and in July 2026 two delegated acts were adopted to simplify certain ESRS and to create a voluntary standard. Turkish companies selling to the EU may not be in scope themselves, but can still feel these rules indirectly through data requests from their customers.
Where should a company start with ESG?
The following steps are not a sourced standard but a practical starting sequence:
- Clarify the scope: Is the company in TSRS scope, will it report voluntarily, or will it only answer requests from customers and lenders?
- Choose the material issues: List the environmental, social and governance issues where the sector and value chain carry risk; do not try to treat them all with equal weight.
- Assign ownership: Energy and emissions data sit with operations, employee data with HR, governance information with legal and finance. Every topic needs a data owner.
- Start with climate data: Since TSRS 2 requires greenhouse gas emissions, a Scope 1 and Scope 2 inventory is the first concrete task for most companies; for the method, see how to calculate a corporate carbon footprint.
- Link to global goals: Mapping material issues to the UN's 17 goals strengthens the report's context; see the Sustainable Development Goals.
Conclusion: is ESG a report or a management system?
ESG is a framework created to measure how environmental, social and governance issues affect a company's risk and value; in Türkiye it has been a TSRS reporting obligation for companies in scope since 2024. Building it as a management routine whose data is collected throughout the year, rather than a document rebuilt every year, makes the work easier. A practical start is to choose the material issues, give each a data owner and get the climate data in order in the first year.
"Corporate Sustainability and ESG Fundamentals" is part of Orient Global's corporate training catalogue; details are on the sustainability page.
This article is for general information only and is not legal advice; KGK's current decisions and announcements prevail.
#interimmanagement #forwarddeployedengineering #esg #corporatesustainability #sustainability