Climate regulation, both a risk and opportunity for Turkish firms

Carbon Disclosure Project, (CDP) was set up nearly 15 years ago to serve investors who wanted to see companies reporting reliable information about their climate change policies.

Since then, the number of companies that responded to that request has reached 5,500, making CDP the only global system for companies and cities to measure, disclose, manage and share vital environmental information.

In 2010, only 11 companies from Turkey participated in the CDP’s climate program. In 2015, this number reached 46, making Turkey the country that has shown the largest percentage growth in the number of companies.

The starting point in 2010 was so modest that some might undermine this 250 percent growth. I prefer to see the glass half full, while bearing in mind that it is also half empty.

While the companies that disclosed their carbon emissions were mostly from the financial sector in 2010, for the past two years, some of the biggest emitters have joined the list of companies involved in CDP Turkey.
It was particularly pleasing to see on the list the Doğan Group to which Hürriyet Daily News belongs among other companies like Alarko, Arçelik, Netaş, Turkcell, Vestel, etc. 

CDP lists each year the companies that achieve A level performance. In order to achieve an “A” performance band, several criteria need to be met, like how publicly available the company’s data is or reducing emissions certain amount compared to previous years.

Last year, out of the 189 companies that globally achieved A level performance, two were from Turkey: Arçelik and Tofaş. This year, out of the 113 companies, Garanti Bank made it to the list. Considering that large emerging economies such as China, India and Brazil don’t have any “A” performers, this is a notable achievement for Turkey, says the report. 

According to the report provided by CDP Turkey, Turkish companies perform largely in line with global averages in terms of carbon disclosure and performance, but lag behind in terms of target setting and the verification of emissions data. 

The report provides an interesting input about the companies’ outlook towards climate change. 

The issue of regulation tops both the list on top risks and top opportunities.

Despite the fact that Turkey has handed the Paris climate change summit the least ambitious intended nationally determined contributions (INDC), an action plan to mitigate its emissions, companies seem not to trust Turkey’s commitment, which runs counter to the international trends. They are concerned that new regulations to be introduced might harm their business if they are caught unprepared. 

“As jet kerosene is our main operational cost item, any taxes on fossil fuels will have a considerable effect on operational expenses. As climate change is seen to be one of the major problems humanity is facing, fossil fuels will most likely be more and more expensive as they are the main source for human-induced climate change. To be able to fund mitigation and adaptation studies governments may incur extra taxes on fossil fuels, which will in turn increase our operational expenses,” Pegasus Airlines, one of the companies on the CDP Turkey list, is quoted as saying in the report.

Regulation is also seen as an opportunity. “It is expected within the next 3-5 years that the energy efficient ‘inverter’ type air conditioners will be obligatory in the market. It means that all other air conditioners will be phased out. And Ihlas Home Appliances may have the chance to increase its sales,” says Ihlas Home Appliances.

Obviously more Turkish companies need to respond to the CDP and those already on the CDP list need to perform better. Rather than waiting for the government to act, it looks like it would be much better for the private sector to trigger transformation and exert pressure on the government to stop resisting change.