Liability of the Board of Directors and Company Executives
Under the Turkish Commercial Code (TCC), board members are obliged to manage the company with due care and loyalty. This obligation is interpreted broadly to include not only financial risks but also environmental and climate-related risks, requiring their anticipation, evaluation, and management.
In this context, carbon footprint has become:
- A component of the company’s risk management system,
- A subject of the board’s oversight and supervisory duty,
- And an area that may trigger personal liability for executives.
Accordingly, board members and senior executives are deemed responsible for:
- Establishing systems that accurately measure and report the company’s carbon emissions,
- Ensuring data production in line with international standards (ISO 14064-1, GHG Protocol, etc.),
- Proactively managing legal, financial, and reputational risks arising from carbon emissions,
- Integrating ESG and sustainability policies into corporate strategy.
Incorrect, incomplete, or misleading carbon disclosures may result not only in administrative sanctions but also in liability for damages (TCC Art. 553 et seq.), breach of duty of care, negligence of duty, and in certain cases, liability under capital markets law.
Moreover, where sustainability reports and carbon data are disclosed to the public, the accuracy of such information falls within the executives’ declaration liability. If investors rely on such data and suffer losses, executives may be held liable.
Similarly, in international practice—particularly under EU regulations (notably CSRD)—governing bodies are directly held responsible for sustainability data, and this responsibility is becoming increasingly explicit and enforceable. This trend is expected to materialize through more concrete regulations in Turkey in the near future.
Additionally, as ESG criteria gain prominence in the financial world, executive performance is no longer measured solely by financial indicators but also by metrics such as carbon emissions, sustainability targets, and climate risk management. This directly links carbon management to executive performance evaluation and incentive mechanisms.
In conclusion, carbon footprint management has become an integral part of:
- The board’s strategic oversight responsibility,
- The executive management’s operational obligations,
- And the company’s corporate governance structure.
Therefore, companies must treat carbon management not merely as a technical process, but as a legal, financial, and managerial risk area requiring board-level attention.
Financial and Commercial Implications
Today, carbon footprint is not only a legal compliance requirement but also a key economic parameter directly affecting a company’s financial performance, commercial sustainability, and market value. As ESG criteria increasingly influence investment decisions globally, companies’ carbon emission profiles have become an integral part of financial evaluation systems.
Banks and financial institutions now consider carbon footprint, sustainability performance, and exposure to climate risks in credit allocation processes. Companies engaged in carbon-intensive activities are often classified as higher risk, leading to:
- Increased financing costs,
- Restricted access to funding,
- Or, in some cases, complete loss of financing opportunities.
Under sustainable finance instruments (e.g., green loans, sustainability-linked loans), companies’ carbon reduction performance is directly tied to financial conditions.
High carbon emissions also lead to direct cost increases. Under the EU’s Carbon Border Adjustment Mechanism (CBAM), companies exporting to the EU may face financial obligations based on embedded carbon emissions in their products. This demonstrates that carbon cost is no longer an externality but a priced and commercially reflected factor.
With the anticipated implementation of emissions trading systems (ETS) and similar mechanisms in Turkey, carbon costs are expected to be more clearly reflected in company balance sheets.
Conversely, companies with low emissions or effective carbon management gain a significant competitive advantage. They:
- Have better access to international markets,
- Are perceived as lower risk by investors,
- And are considered more sustainable.
Especially in export-oriented sectors, carbon performance has become a determining factor in market access and customer preference.
Carbon footprint also impacts company valuation. Investors consider carbon risks and sustainability performance in M&A transactions and IPOs. Carbon-intensive companies may be subject to higher discount rates, whereas companies with strong ESG performance attract higher valuation multiples and enjoy greater long-term financial stability.
In summary, carbon footprint has become a multidimensional economic and legal factor that:
- Affects access to financing,
- Determines cost structures,
- Shapes international trade opportunities,
- And directly influences company valuation.
Thus, carbon management is no longer just an environmental responsibility but a strategic necessity for maintaining financial sustainability and commercial existence.
A New Advisory Area for Law Firms
Carbon footprint, greenhouse gas emissions, and related obligations have led to the emergence of a new and rapidly evolving area of legal expertise. International regulations, EU legislation, and transformations in national legal systems require law firms to move beyond traditional advisory services and offer multidisciplinary solutions.
Carbon management is no longer merely a technical sustainability issue but a field directly linked to legal risk analysis, contractual structuring, regulatory compliance, and auditing processes. For companies operating in Turkey and engaging with the EU, compliance with carbon-related regulations has become practically mandatory.
Key advisory services for law firms in this field include:
- Legal review of carbon reporting and verification processes:
Assessing compliance of greenhouse gas inventories and sustainability reports with international standards and analyzing legal risks associated with such data. - Integration of ESG and carbon obligations into contracts:
Structuring carbon-related commitments, reporting obligations, and audit rights in supply, production, logistics, and service agreements. - Structuring supply chain responsibility:
Addressing Scope 3 emissions and distributing risks across the supply chain through legal mechanisms. - Regulatory compliance advisory:
Supporting companies in aligning with EU regulations (CBAM, CSRD, etc.) and evolving Turkish legislation, while preparing them for future obligations.
These developments indicate that carbon compliance and ESG law are emerging as distinct and specialized legal practice areas, expected to intersect with M&A, project finance, capital markets, and international trade law.
Conclusion
Carbon footprint is no longer merely an environmental performance indicator but a multidimensional factor affecting legal compliance, financial sustainability, and international competitiveness.
Companies must:
- Measure greenhouse gas emissions in line with international standards,
- Establish transparent, traceable, and verifiable reporting systems,
- Identify and manage carbon-related legal, financial, and contractual risks proactively.
For Turkish companies trading with the EU, carbon footprint has become a determining factor for market access, cost management, and competitive advantage. With upcoming regulations in Turkey, these obligations will inevitably extend across all sectors.
Carbon management should therefore be treated as a strategic legal, compliance, and risk management area. Poorly structured carbon processes may lead to:
- Administrative sanctions,
- Contractual liabilities,
- Financing difficulties,
- And reputational damage.
As GULERS&PARTNERS, we provide holistic and proactive legal advisory services in carbon management and ESG compliance, including:
- Legal analysis of carbon reporting and verification processes,
- Integration of ESG and carbon obligations into contracts,
- Structuring carbon risks in supply chains and international trade,
- Managing compliance with EU regulations and evolving Turkish legislation.
The transition in carbon and sustainability also creates new opportunities. Companies that manage this process effectively will not only mitigate risks but also strengthen their position in international markets and create long-term value.
Therefore, addressing carbon footprint and ESG compliance at an early stage with the correct legal perspective is critical for shaping a company’s future position.