What is Climate Law? How is the Climate Law Implemented in Turkey?

Global warming and climate change are no longer just an environmental issue, but have become central to international trade, corporate governance and financial sustainability. Governments and regulatory bodies are establishing legal frameworks to mitigate (mitigation) and adapt to (adaptation) the impacts of the climate crisis. In this context, climate law is one of the most important regulatory steps that institutions face.

As the period in which companies only submitted voluntary sustainability reports is coming to an end, a new era has begun in which legal compliance and absolute legal obligations have taken its place. In this transition process, the future-proofing of businesses depends on their understanding and implementation of the requirements of climate policies.

What is Climate Law?

The question ofwhat is a climate law can be answered as a set of binding legal regulations enacted by states to reduce greenhouse gas emissions, accelerate the transition to renewable energy and integrate global commitments such as the Paris Agreement into domestic law. These legal frameworks make it a legal obligation for companies to measure and report their carbon footprint and reduce their emissions in line with certain targets.

Countries around the world that have adopted climate laws often set concrete milestones for achieving Net-Zero targets and introduce mechanisms such as carbon pricing (e.g. Emissions Trading Systems - ETS). In particular, the European Union's Corporate Sustainability Reporting Directive (CSRD) and the Border Carbon Adjustment Mechanism (CBAM) are clear examples of how such laws shape international trade.

Why Climate Law Matters

Climate laws force companies to shift from a traditional "take-make-dispose" economy to a circular and low-carbon economy. When this transformation process is considered within the framework of ESGF (Environmental, Social, Governance and Financial Sustainability), it is seen that compliance with climate laws is vital for the financial health (F dimension) of companies.

Financial and Operational Risks: Physical risks (extreme weather events, drought) and transition risks (regulatory costs) brought about by climate change directly affect company balance sheets. For example, for companies that produce carbon-intensive products and are caught unprepared for these laws, climate law damages are reflected in financial statements as high carbon taxes, CBAM certification costs or investments that become "stranded assets".

Global Competitiveness: In export-oriented countries like Turkey that are integrated into international supply chains, failure to comply with climate legislation means market loss. Turkish companies exporting to the EU may lose their competitive advantage if they fail to transparently report their environmental data.

Which Areas Does Climate Law Cover?

A climate law is usually based on monitoring, reporting and verification (MRV) systems of emissions. When national and international climate law articles are analyzed, the main areas that companies must comply with are as follows:

Reporting of Greenhouse Gas Emissions: Companies are obliged to calculate Scope 1 (direct), Scope 2 (purchased energy) and Scope 3 (supply chain) emissions in accordance with the ISO 14064-1 standard.

Carbon Pricing and Taxation: It is ensured that carbon is included as a cost (shadow carbon price) in companies' investment decisions. Buried emissions (SEE) reporting is mandatory for iron and steel, cement, aluminum, fertilizer, hydrogen and electricity sectors for exports to the EU.

Double Materiality: Companies are required to report not only the impact of climate on their financials, but also the impact of their activities on the environment.

Integrated Sustainability Reporting: In Turkey, the Turkish Sustainability Reporting Standards (TSRS) issued by the Public Oversight Authority (POA) require large companies and financial institutions to report climate risks in accordance with ISSB (IFRS S1/S2) and ESRS standards. These standards form the reporting pillar of climate legislation.

To comply with these complex clauses and data-intensive processes, companies can minimize their legal compliance risks by using AI and automation-powered carbon accounting software such as CimpactPro.

The Future of Climate Law and Implementation Challenges

The climate law proposal in Turkey and whether the climate law has been adopted are among the agenda items closely followed by the business world. Turkey has set its strategic direction by ratifying the Paris Agreement and launching the Green Deal Action Plan in 2021. While the work on a comprehensive national climate law (and national Emissions Trading System - ETS) continues at the parliamentary level, the obligations imposed by the legislation (TSRS reporting obligations and external regulations such as EU CBAM) have started to be implemented in practice.

The main challenges faced by companies during this transition process are as follows:

Lack of Information and Resources: SMEs and emerging sectors in particular struggle with ESG (Environmental, Social, Governance) data collection capacity and reporting costs.

Supply Chain Management: Climate laws hold the entire supply chain responsible, not just the main producer. Critical sectors such as textiles urgently need to raise social and environmental standards in their supply chains.

Despite these challenges, legal frameworks also offer companies great opportunities. In Turkey, with its high potential for renewable energy (solar, wind), companies can gain a competitive advantage in global markets by investing early in green hydrogen, electric vehicle components and circular economy models, and have easier access to green financing (sustainable bonds, loans). Compliance with climate laws is not just a legal obligation, but a fundamental condition for survival and "good business" in the 21st century.