Sustainability Structuring in the Automotive Industry ♻ 🚗 💨 Ulus Metal Sanayi ve Ticaret A.Ş.

Sustainability Structuring in the Automotive Industry

The automotive industry is developing various strategies and practices by adopting environmental, social, and economic sustainability principles to build a more sustainable future. This structuring encompasses not only the production processes but also the product life cycles and corporate policies of companies.

Environmental Sustainability

- Reducing Carbon Emissions: The production of electric and hybrid vehicles is being promoted, and fossil fuel consumption is being reduced.

- Energy Efficiency: The use of renewable energy sources and increasing energy efficiency in production facilities.

- Waste Management: Reducing waste in production processes and adopting recycling and reuse methods.

- Water Management: Implementing effective water management strategies to reduce water consumption and protect water resources.

Social Sustainability

- Employee Health and Safety: Improving occupational health and safety standards and ensuring safe working conditions.

- Education and Development: Providing continuous education and development opportunities for employees.

- Community Contribution: Encouraging companies to participate in social responsibility projects and contribute to local development and community projects.

Economic Sustainability

- Long-term Growth: Focusing on innovation and R&D investments to sustain the long-term economic performance of companies.

- Cost Efficiency: Increasing efficiency in production processes and reducing costs.

- Supply Chain Management: Adopting sustainable and ethical supply chain practices.

Turkish Sustainability Reporting Standards (TSRS SKDM)

Effective from January 1, 2024, TSRS provides standards that enable companies in Turkey to report their sustainability performance more comprehensively and transparently. These standards help companies evaluate and report their environmental, social, and governance performance.

Sustainability Report

- Comprehensive Information: Companies are required to provide comprehensive information about their sustainability goals, strategies, practices, and performance results.

- Performance Indicators: Detailed reporting of environmental, social, and economic performance indicators.

- Improvement Areas: Specifying future sustainability goals and planned improvement areas to achieve these goals.

Materiality Assessment

According to TSRS, materiality is "the appropriateness to the entity's need." Important issues are those that, if misrepresented or concealed, could reasonably be expected to influence the decisions of users of the report. This assessment helps companies determine their sustainability strategies and ensure transparency.

EU Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD)

- CSRD: Requires companies to report their sustainability strategies, related goals, and the policies and measures implemented to achieve these goals.

- CSDDD: Aims to establish procedures for public disclosure of sustainability information and hold companies accountable for due diligence failures.

Mandatory Reporting

From January 1, 2024, certain businesses must report their sustainability performance according to TSRS. Large-scale companies and those operating in specific sectors are included in this mandatory reporting requirement.

Conclusion

Sustainability in the automotive industry is gaining importance to provide a competitive advantage and contribute to society. Compliance with sustainability reports and TSRS standards helps companies transparently demonstrate their performance in this field. Through these reports, companies can take significant steps toward achieving their environmental, social, and economic sustainability goals.

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Corporate Sustainability Reporting

Sustainability reporting is an important tool that enables companies to regularly and transparently share their performance on environmental, social, and governance (ESG) issues. These reports aim to help companies monitor their sustainability strategies and policies while providing reliable and accurate information to stakeholders.

EU Corporate Sustainability Reporting Directive (CSRD) 

CSRD mandates that large companies operating within and outside the EU report their sustainability strategies, objectives, policies, and practices. According to this directive:

- Companies with more than 500 employees must report starting January 1, 2024.

- Companies with more than 250 employees must report starting January 1, 2025.

- SMEs must report starting January 1, 2026.

Turkish Sustainability Reporting Standards (TSRS)

Effective January 1, 2024, TSRS aims to make sustainability reporting more comprehensive and standardized for companies in Turkey. TSRS requires companies to conduct materiality assessments to better analyze their sustainability strategies and performance. Materiality assessment determines how the reported information impacts the company's decision-making processes and its importance to stakeholders.

Which Companies Are Required to Report?

Under TSRS, the following companies are required to report their sustainability performance:

- Companies with total assets of 500 million Turkish Lira,

- Annual net sales revenue of 1 billion Turkish Lira,

- Number of employees 250.

Businesses exceeding at least two of these thresholds for two consecutive reporting periods are subject to mandatory reporting. Additionally, certain banks and financial institutions must report without being subject to thresholds.

Sustainability Reporting Frameworks

Companies can use various frameworks for their sustainability reporting, including:

- Global Reporting Initiative (GRI)

- International Sustainability Standards Board (ISSB)

- European Sustainability Reporting Standards (ESRS)

These frameworks provide different approaches for assessing and reporting companies' sustainability performance.

Conclusion

Sustainability reporting has evolved from a voluntary corporate communication activity to a critical tool that allows companies to effectively analyze and transparently share their sustainability strategies and performance. Both the EU directives and TSRS increase companies' responsibilities regarding sustainability and standardize reporting processes.

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Introduction - What is CSDDD?

Companies, through their financial and human resources, cause significant environmental impacts. Controlling the complex economic activities of multinational companies across different legal systems in terms of environmental and human rights violations is quite challenging. Until recently, regulations largely required companies to report on a voluntary basis. For example, a company based in the European Union could engage in business relationships with local suppliers in underdeveloped countries that employ child labor or harm the environment, without facing any legal consequences.

To address this, the European Union designed the Corporate Sustainability Due Diligence Directive (CSDDD), which aims to hold companies accountable not only for their activities but also for the human rights and environmental violations of stakeholders in their supply chains. The EU intends to create a domino effect through the economic and market power of European companies, leading a transformation.

What Does Due Diligence Mean?

The term 'due diligence,' sometimes translated as 'situation assessment,' can be more accurately described as 'due diligence.' It refers to the processes through which businesses identify, monitor, prevent, mitigate, rectify, or terminate the actual and potential adverse impacts related to their activities. It also defines how enterprises handle these adverse impacts.

What is the Exact Purpose of CSDDD?

The Corporate Sustainability Due Diligence Directive aims to integrate due diligence policies into the management systems of specific large companies operating in the European Union to identify and address human rights and environmental violations before and after they occur.

How Will CSDDD Achieve This?

This regulation requires companies to implement the following measures:

- Integrate the due diligence process into all relevant policies and risk management systems.

- Identify and assess all actual and potential adverse impacts.

- Prevent and mitigate potential adverse impacts.

- Terminate existing adverse impacts.

- Compensate for existing adverse impacts.

- Develop strategies and business plans for transitioning to a sustainable economy and limiting global warming.

Which Companies Does the Regulation Cover?

EU Companies:

If an EU company or its ultimate parent company has an average of more than 1000 employees and a global turnover of €450 million in the last financial year, it is subject to CSDDD. These companies are also subject to other sustainability regulations, such as the Corporate Sustainability Reporting Directive (CSRD).

Non-EU Companies:

Non-EU companies or their ultimate parent companies that exceeded the €450 million turnover threshold within the EU in the previous financial year are also subject to CSDDD, regardless of the number of employees.

Financial Market Participants:

The financial sector is only subject to due diligence requirements for downstream business partners in supply chains. The European Commission is tasked with working on extending due diligence for financial markets in the long term.

Implementation Timeline

First Group Companies:

Companies with an average of more than 5000 employees and a global turnover of €1.5 billion in the previous financial year must implement CSDDD requirements within 3 years.

Second Group Companies:

Companies with an average of more than 3000 employees and a global turnover of €900 million in the previous financial year must implement the requirements within 4 years.

Third Group Companies:

Companies with an average of more than 1000 employees and a global turnover of more than €450 million in the previous year must implement the requirements within 5 years.

Where Does CSDDD Fit in the Bigger Picture?

CSDDD, like all other regulations, is part of the EU Green Deal and has close ties with these regulations. For instance, it complements the EU Taxonomy, which classifies economic activities in terms of sustainability. It is also interconnected with the CSRD, which mandates sustainability reporting in the EU. For those interested in more, here are other European Union regulations related to CSDDD:

- Human Trafficking Directive

- Sanctions Directive for Employees

- Critical Raw Materials Regulation

- Deforestation-Free Supply Chain Proposal

- New Battery Regulation

- Sustainable Product Initiative

- Ecodesign Directive

- European Climate Law

- Circular Economy Action Plan

- Biodiversity Strategy

- Farm to Fork

- Chemicals Strategy

- New Industrial Strategy

- Foundations of the European Social Rights Action Plan

In Conclusion

The implementation of the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) makes it clear that European companies intending to fulfill their responsibilities under these regulations are already requesting more information from Turkish companies regarding their sustainability performance. Companies falling under the scope of CSDDD are likely to reflect their obligations onto Turkish companies through contracts, and Turkish companies failing to meet these requirements may find themselves excluded from the value chains of companies covered by CSDDD. Therefore, enhancing corporate sustainability capacities becomes imperative for our companies.