Introduction: EU Sustainability Regulation Knows No Borders
The European Union's Corporate Sustainability Reporting Directive (CSRD) entered into force on January 5, 2023. Directive (EU) 2022/2464 comprehensively revises the existing Non-Financial Reporting Directive (NFRD), fundamentally transforming the EU sustainability reporting framework (European Parliament and Council, "Directive (EU) 2022/2464," 2022).
While the CSRD's direct scope is limited to companies operating in the EU, the Directive's value chain reporting requirements and provisions for non-EU parent companies create a wide sphere of influence extending across global supply chains. Turkey, as one of the EU's largest trading partners, sits at the center of this impact.
This report analyzes the CSRD's extraterritorial effects from the perspective of Turkish suppliers, presents a sector-specific risk assessment, and proposes preparation strategies.
CSRD Scope: Who Will Report?
The CSRD phases in reporting obligations progressively:
| Phase | Effective | Scope | First Report |
|---|---|---|---|
| 1 | 2024 financial year | Large public-interest entities already under NFRD (500+ employees) | 2025 |
| 2 | 2025 financial year | Other large companies (meeting at least two of: 250+ employees, EUR 50M+ turnover, EUR 25M+ balance sheet) | 2026 |
| 3 | 2026 financial year | Listed SMEs (excluding micro-enterprises) | 2027 |
| 4 | 2028 financial year | Non-EU parent companies (EUR 150M+ net turnover in the EU) | 2029 |
Phase 4 is the most explicit expression of the CSRD's extraterritorial dimension. However, the mechanism that affects Turkish suppliers much earlier is the value chain reporting obligation of EU companies falling under Phases 1 and 2.
Value Chain Reporting: The Supplier Dimension of ESRS
Value Chain Definition in ESRS 1
The European Sustainability Reporting Standards (ESRS) constitute the technical framework for CSRD reporting. In the ESRS set enacted through Commission Delegated Regulation (EU) 2023/2772, Chapter 5 of ESRS 1 establishes the general principles for value chain reporting (European Commission, "Commission Delegated Regulation (EU) 2023/2772," 2023).
ESRS 1 explicitly states that "the sustainability statement of the reporting undertaking shall include information about the value chain identified through the materiality assessment, not only about the undertaking's own operations" (ESRS 1, Chapter 5, paragraph 62). This provides a direct legal basis for an EU customer company to request sustainability data from its Turkish supplier.
What Data Will Be Requested?
The data that may be requested across the value chain under ESRS covers a broad spectrum:
Environmental Data (ESRS E1-E5):
- Scope 3 greenhouse gas emissions (particularly under ESRS E1 Climate Change)
- Energy consumption and energy intensity
- Water usage and discharge data
- Waste generation and circular economy indicators
- Biodiversity impacts
The ESRS E1 (Climate Change) standard requires the reporting company to disclose its Scope 3 emissions, a significant portion of which originate from the supply chain (European Financial Reporting Advisory Group, "ESRS E1 Climate Change," 2023, paragraphs 44-50).
Social Data (ESRS S1-S4):
- Working conditions of workers in the value chain
- Occupational health and safety data
- Fair wage and collective bargaining information
- Human rights due diligence outcomes
Governance Data (ESRS G1):
- Business ethics and anti-corruption policies
- Supplier code of conduct compliance
EFRAG Implementation Guidance IG 2
Implementation Guidance IG 2, published by EFRAG (European Financial Reporting Advisory Group), provides practical direction for collecting value chain information. The guidance emphasizes that reporting companies must apply a "reasonable effort" principle when requesting data from suppliers, while clearly stating that comprehensive sustainability reporting is not possible without supplier data (EFRAG, "Implementation Guidance IG 2: Value Chain," 2023).
For Turkish suppliers, this means: your EU customers will request data from you as a legal obligation, and this request goes beyond a goodwill gesture — it is a requirement for their reporting compliance.
Article 40: Direct Obligations for Non-EU Parent Companies
Article 40 of the CSRD introduces a separate reporting obligation for non-EU parent companies. Non-EU parent companies with consolidated net turnover exceeding EUR 150 million in the EU and at least one subsidiary or branch in the EU must prepare a consolidated sustainability report from the 2028 financial year onward (European Parliament and Council, "Directive (EU) 2022/2464," 2022, Article 40).
This provision directly concerns Turkish holding groups with significant operations in the EU. However, the scope of Article 40 is relatively narrow, and the primary impact mechanism for the vast majority of Turkish suppliers is value chain reporting.
The European Commission FAQ Perspective for Turkish Suppliers
The European Commission's FAQ on CSRD scope emphasizes that value chain reporting is subject to a "proportionality" principle. Accordingly, reporting companies should request information that is "reasonably obtainable" from suppliers. However, the same FAQ also clearly sets the expectation that companies will progressively improve the quality and scope of value chain data over time (European Commission, "European Commission FAQ on CSRD Scope," 2023).
This "progressive improvement" expectation carries a clear signal for Turkish suppliers: data coverage accepted as baseline today will become insufficient within a few years.
Sector Impact Analysis: Turkey's Exports to the EU
According to data from the Turkish Exporters Assembly (TIM), the EU is Turkey's largest export market, accounting for approximately forty-one percent of total exports (Turkish Exporters Assembly, "Export Statistics," 2023). The World Bank's Turkey Trade Profile confirms this proportion (World Bank, "Turkey Trade Profile," 2023). The CSRD's value chain requirements will affect Turkish sectors exporting to the EU at varying intensities.
Automotive Sector: High Impact
The Turkish automotive sector is a critical link in the EU automotive supply chain. In 2023, Turkey's automotive exports to the EU totaled approximately USD 20 billion. EU automotive manufacturers (OEMs) are already requesting carbon footprint data from their suppliers; the CSRD will transform these requests into legal requirements.
Expected data requests:
- Part-level greenhouse gas emissions (Scopes 1, 2, and upstream supply chain)
- Energy intensity and renewable energy usage ratio
- Waste management and circularity metrics
- Working conditions and occupational safety indicators
In the automotive sector, data-sharing platforms such as Catena-X are accelerating standardized data exchange along the supply chain. Integration of Turkish automotive suppliers into these ecosystems is a strategic priority.
Textiles and Apparel: High Impact
Turkey ranks among the EU's largest textile and apparel suppliers. This sector occupies a particularly sensitive position with respect to the social dimension of the CSRD.
Expected data requests:
- Water consumption and wastewater quality (especially for dyeing and finishing processes)
- Chemical usage and ZDHC (Zero Discharge of Hazardous Chemicals) compliance
- Workforce profile: wage levels, working hours, unionization rate
- Supply chain traceability (back to raw material origin)
- Human rights due diligence outcomes
Major fashion and retail groups in the EU have begun systematizing supplier sustainability assessments. The CSRD elevates this trend to the level of legal obligation.
Food and Agriculture: Medium-High Impact
Turkey's food and agricultural exports to the EU — led by hazelnuts, dried fruit, olive oil, and grains — face rising environmental data demands along the value chain.
Expected data requests:
- Carbon footprint of agricultural production processes
- Water use efficiency and irrigation practices
- Pesticide and fertilizer usage data
- Land use and biodiversity impacts
- Food safety and traceability
Data collection in this sector is particularly challenging due to the prevalence of small-scale producers. The coordination role of cooperatives and exporter unions will be critical.
Iron, Steel, and Metals: High Impact
Turkey exports significant volumes of iron, steel, and metal products to the EU. This sector faces dual pressure from both the CSRD and CBAM (Carbon Border Adjustment Mechanism).
Expected data requests:
- Facility-level greenhouse gas emissions (direct and indirect)
- Energy source distribution and energy efficiency
- Scrap utilization rate and circularity metrics
- Air and water quality impact data
- Occupational safety and occupational disease statistics
Significant data overlaps exist between CSRD value chain requirements and CBAM reporting requirements. This synergy can be leveraged through a coordinated data management strategy.
Impact Ranking Summary
| Sector | EU Export Volume | CSRD Impact Level | Priority Data Areas |
|---|---|---|---|
| Automotive | ~USD 20 billion | High | Carbon, energy, circularity |
| Textiles/Apparel | ~USD 12 billion | High | Water, chemicals, social |
| Iron-Steel/Metals | ~USD 10 billion | High | Carbon, energy, air quality |
| Food/Agriculture | ~USD 7 billion | Medium-High | Water, land, biodiversity |
Preparation Strategies: A Proactive, Not Reactive, Approach
Strategy 1: Build a Foundational Sustainability Database
The first and most critical step is establishing a reliable company-level sustainability data infrastructure. This infrastructure should cover at minimum:
- An ISO 14064-1 compliant greenhouse gas inventory (Scopes 1 and 2)
- Energy consumption and source distribution data
- Water withdrawal, consumption, and discharge data
- Waste generation and recycling rates
- Basic workforce indicators (headcount, accident rates, training hours)
Establishing the data collection process in advance enables rapid and accurate responses to requests from EU customers.
Strategy 2: Adopt Sector-Specific Standards and Platforms
Each sector is developing its own sustainability data-sharing standards and platforms:
- Automotive: Catena-X, IMDS (International Material Data System)
- Textiles: Higg Index (Sustainable Apparel Coalition), ZDHC Gateway
- Food: SAI Platform (Sustainable Agriculture Initiative), GLOBALG.A.P.
- Metals: ResponsibleSteel, worldsteel CO2 Data Collection
Early participation in these platforms builds the capacity to deliver data in the formats expected by EU customers.
Strategy 3: Establish Human Rights Due Diligence Processes
The CSRD and ESRS explicitly require human rights due diligence throughout the value chain. For Turkish suppliers, this means establishing:
- A human rights policy and commitment statement
- Human rights risk assessment within the supply chain
- Grievance mechanisms
- Corrective action processes
The UN Guiding Principles on Business and Human Rights (UNGPs) are the fundamental reference framework in this area.
Strategy 4: Proactive Dialogue with EU Customers
Rather than waiting for data requests from EU customers, take a proactive approach:
- Share your existing sustainability data
- Transparently communicate your data gaps and improvement plans
- Propose collaboration on joint data collection methodologies
- Learn your customer's CSRD reporting timeline and plan your own preparations accordingly
This approach transforms the supplier-customer relationship from a compliance burden into a strategic partnership.
Strategy 5: Capacity Building and Training
Sustainability reporting is not solely the responsibility of the environmental or sustainability department. Effective preparation requires:
- Engaging finance, operations, human resources, and procurement functions in the process
- Technical training programs on data collection and reporting
- Expanding internal audit capacity to cover sustainability data
- Briefing senior management on CSRD implications
Timeline: An Urgency Perspective
| Date | Development | Impact for Turkish Suppliers |
|---|---|---|
| 2025 | Phase 1 companies publish first CSRD reports | First value chain data requests arrive |
| 2026 | Phase 2 companies begin reporting | Data requests expand significantly |
| 2027 | Listed SMEs come into scope | Requests from mid-sized EU customers also begin |
| 2028 | Sector standards mature | Data quality expectations rise |
| 2029 | Non-EU parent company reporting begins | Turkish groups with direct reporting obligations are affected |
This timeline clearly demonstrates that preparation should begin in 2024-2025. Being caught unprepared by data requests arriving in 2026 could put commercial relationships at risk.
Opportunities: Compliance as a Sustainability Advantage
CSRD compliance should be viewed not merely as a cost and burden but as a strategic opportunity:
Competitive advantage: Suppliers that can deliver sustainability data on time and reliably will rise to the top of EU customers' preferred supplier lists. Suppliers unable to provide data will gradually find themselves at a disadvantage.
Operational efficiency: Systematic tracking of greenhouse gas emissions and resource consumption typically reveals cost-saving opportunities as well. Energy efficiency improvements, waste reduction, and water savings directly impact the bottom line.
Access to finance: International financial institutions are placing increasing weight on sustainability performance in credit and investment decisions. A robust sustainability data infrastructure facilitates access to green financing instruments.
Regulatory preparedness: Turkey's own sustainability reporting regulations are expected to develop in alignment with the EU. Companies preparing for the CSRD will also be ready for national regulations.
Conclusion and Recommendations
The CSRD is a comprehensive regulation that creates tangible effects beyond EU borders. For Turkish suppliers, this impact is not a theoretical possibility but a commercial reality that will materialize from 2025-2026.
Key recommendations:
- Immediate: Map your company's EU customer portfolio and identify which CSRD reporting phase each customer falls under.
- Short-term (2024-2025): Build foundational sustainability data infrastructure covering at minimum greenhouse gas inventory, energy, and water data.
- Medium-term (2025-2026): Join sector-specific data-sharing platforms and initiate proactive dialogue with EU customers.
- Strategic: Position CSRD compliance not as a cost but as an investment that strengthens your position in the supply chain.
The CSRD's value chain dimension will affect every Turkish company that trades with the EU in some form. Those who begin preparing early have the opportunity to turn this transformation into an opportunity rather than a threat.
Action Item: Compile a list of your EU customers and determine which CSRD reporting phase each one falls under. Anticipate the timing of the first data requests from your customers and build your own data preparation timeline accordingly.