Sustainability Assurance

PH brings the experience it has built in independent audit and tax audit to sustainability assurance. We independently audit the sustainability reports of companies within the scope of the Turkish Sustainability Reporting Standards (TSRS), in line with KGK regulations, and help them present reports that investors, lenders and business partners can rely on.

The team that knows your financial statements also audits your sustainability report

The PH audit team reviews your financial statements through independent audit and tax audit, and your sustainability report through sustainability assurance. Assessing both reports through the same lens means consistent, reliable information for investors, lenders and business partners.

TSRS requires sustainability information to be presented in connection with the financial statements.

Sustainability is now a finance matter

For many years, sustainability was seen as an activity run by a company’s corporate communications team. That era is over: today, sustainability is the job of the finance function. There are three reasons.

Reporting has become an obligation. Sustainability information is now disclosed alongside the financial statements, subject to audit and in accordance with defined standards. Data collection, internal control, materiality assessment and assurance readiness all fall within the expertise of the finance function.

Sustainability risks are financial risks. Carbon pricing, stranded assets, supply chains and physical climate events show up directly as costs, impairments and business interruption.

Access to capital depends on it. Green bonds, sustainability-linked loans and ESG-focused funds tie a company’s sustainability performance directly to its cost of borrowing.

None of this is an environmental issue; it is a cash flow issue

Sustainability risk	Financial impact
Carbon pricing	Cost item
Stranded assets	Impairment
Supply chain non-compliance	Supply disruption and penalty risk
Climate-related physical events	Business interruption and insurance costs

The legal framework is still taking shape

Four areas where the details are still changing:

Scope thresholds

Implementation timelines

Levels of assurance

Disclosure requirements

The European Union’s simplification (Omnibus) initiatives directly affect each of these areas.

Who is audited, and under which rules?

The sustainability reports of companies within the scope of TSRS must undergo assurance by independent audit firms authorized by KGK in this field.

Scope test: at least two thresholds, two consecutive periods

A company that exceeds two of the following thresholds for two consecutive periods must report and be audited:

TRY 1 billion Total assets

TRY 2 billion Annual net sales revenue

500 Employees

Some entities, such as banks listed on Borsa Istanbul, are in scope regardless of the thresholds.

The chain of rules

Reporting: TSRS 1 and TSRS 2 General requirements and climate-related disclosures

Audit: Sustainability Audit Regulation 17 January 2025

Standards: GDS 3000 and GDS 3410 Until SGDS 5000 takes effect

Auditor appointment: General assembly As with the financial statement auditor

Companies outside the scope may also have their reports assured voluntarily, in response to requests from investors, banks or EU-based customers.

What level of assurance?

Under current practice, sustainability reports are subject to limited assurance; regulation is expected to move toward reasonable assurance over time. The move from limited to reasonable assurance means deeper evidence and a stronger opinion.

	Limited assurance Current practice	Reasonable assurance Expected transition
Depth of work	Mainly inquiry and analytical procedures	Tests of controls and extensive tests of details
Form of opinion	Negative form: “nothing has come to our attention that causes us to believe there is a material misstatement”	Positive form: “prepared, in all material respects, in accordance with”
Level of assurance	Meaningful, but lower than reasonable assurance	High; similar to a financial statement audit
Readiness required	Data collection processes and documentation	Documented and testable internal controls

Materiality assessment: where everything begins

The materiality assessment determines which topics are included in the report, so it is one of the first areas we examine in an audit. An incomplete or poorly documented assessment makes it harder to provide assurance on the report as a whole.

A topic is material if it could influence an investor’s decision

Risks and opportunities Sustainability-related matters, including across the value chain

Financial effect Cash flows, access to finance and cost of capital, over the short, medium and long term

User decisions Investors, lenders and other creditors

Material information Disclosed in the report; omitting or obscuring it would be misleading

Unlike the double materiality approach of ESRS, TSRS focuses on the financial effect on the company.

We test six aspects of the materiality assessment

Complete risk universe Have the industry’s SASB disclosure topics been considered?

Value chain Are suppliers, customers and logistics included?

Time horizons Are the time horizons consistent with strategy and risk management?

Criteria Are the impact and likelihood criteria clear and documented?

Consistency with the financial statements Does it align with impairment and provision assumptions?

Approval and updates Has the board of directors approved it, and is it updated every period?

The four gaps we see most often

GRI analysis used as is An impact-focused analysis is used without being adapted to TSRS.

Unsupported scores The basis for impact and likelihood scores is not documented.

Incomplete value chain Risks arising from suppliers and customers are left out of scope.

Excluded topics There is no written explanation of why topics deemed immaterial were excluded.

Note: The auditor’s materiality threshold is a separate concept. The company’s reporting materiality determines what goes into the report, whereas the auditor sets its own materiality level to evaluate whether misstatements identified affect the report.

Two kinds of support, in line with independence rules

Companies we audit: we assess We do not prepare the materiality assessment; we only assess it. We share our findings with management before the audit and give them the opportunity to make corrections.

Companies we do not audit: we support We provide consultancy and training services on TSRS-aligned materiality assessment methodology and implementation.

Assurance in five steps

Our process consists of five stages, planned around your report’s publication schedule.

Preliminary assessment Scope test, independence check, engagement letter

Planning Business model and materiality assessment; risk areas

Data review Greenhouse gas calculations, scenario analyses, site visits

Consistency Comparison with the financial statements, annual report and KAP disclosures

Reporting Assurance report and management letter

We share findings with you as we go at every stage, so corrections can be made before the report is published.

Why work with PH

Reliable, consistent and independent sustainability assurance.

An integrated view By offering independent audit, tax audit and sustainability assurance under one roof, we assess the consistency of financial and non-financial information as a whole.

A qualified team Our audits are carried out by our sustainability auditors authorized by KGK.

Sector experience With the experience we have gained in the energy, manufacturing and finance sectors, we understand sector-specific risks and SASB disclosure topics.

Readiness support To the extent permitted by independence rules, we offer a readiness assessment before the audit. To protect our independence, we do not take part in preparing the reports we audit.