Companies today are no longer solely motivated by profit. They also aim to balance their societal, environmental and economic impacts while meeting the needs of future generations. Achieving this on a corporate level involves the principle of governance. So, what is governance? What is the concept most closely associated with corporate sustainability? What does it encompass? What governance practices are adopted at SOCAR Turkey? Let's explore the answers to these questions together.

What is governance?

To explain governance, it's crucial to touch upon the ESG approach first, as governance is one of its underlying branches. ESG is an acronym derived from the initials of the English words environmental, social and governance, evaluating a company's practices in these areas as a management approach.

The environmental aspect assesses a company's efforts to reduce its environmental impacts, such as climate change, energy efficiency and waste management. The social dimension covers subjects like employee rights, customer satisfaction and community involvement. The governance approach, the primary focus of this article, encompasses corporate governance steps related to management, leadership, transparency and ethical values.

In definition, governance refers to the rules, practices and processes that determine how an organization or company is managed. Its aim is to create an appropriate environment and culture for better management of the company and to gain stakeholders' trust. It can be used to achieve corporate sustainability goals and meet societal expectations. It regulates both internal processes and interactions with employees, suppliers and the community. When implemented correctly, it helps align the interests of managers, stakeholders and employees. It also audits a company's management and leadership structure in adherence to sustainability and social responsibility commitments.

It's essential not to confuse governance with management. Management processes organize and oversee the distribution of tasks and workflows within a company. However, governance has a much broader perspective, concerning how the company is overall managed, how decisions are made and how those decisions are overseen. Establishing a leadership structure that reflects the organization's objectives and values is a fundamental aspect of governance. It also examines the company's accountability and transparency to both internal and external stakeholders.

What are the elements of governance?

The success of governance depends on the effective handling and implementation of its elements:

Transparency and Accountability:

It's crucial for companies to transparently share their activities, resource utilization and decisions with the public. This transparency is a fundamental element of corporate governance, ensuring continuity in sustainability efforts and meeting societal expectations. Being accountable for the outcomes of their activities demonstrates the company's awareness of its responsibilities to the environment and society. At SOCAR Türkiye, we announce our sustainability efforts in our annual sustainability report published on our website. You can click here to review the SOCAR Türkiye Sustainability Report.

Participation:

Encouraging effective participation from stakeholders in the company's management processes is crucial. The involvement and support of investors, employees, and suppliers in planning and executing activities are essential for long-term success.

Equality and Diversity:

Having employees with diverse perspectives, skills and experiences within the company can lead to more creative and ethical decision-making. Additionally, having diversity in terms of gender, race, and cultural backgrounds enables successful governance within companies.

“Having employees with diverse perspectives, skills and experiences within the company can lead to more creative and ethical decision-making.”

Risk Management:

Governance aids companies in predicting and managing risks, encompassing financial, environmental and various other risks. Effective governance allows companies to identify and evaluate risks and develop strategies to mitigate them.

Long-Term Strategies:

For good governance, companies need to focus on both short-term and long-term goals. This helps achieve better results in terms of sustainability and societal impact.

At SOCAR Türkiye, we lead the industry by successfully implementing corporate governance measures. We were honored with the award for having the best corporate governance practices in Türkiye at the World Finance Corporate Governance Awards. These awards evaluate companies with diverse governance models that prioritize transparency, accountability and awareness of responsibilities to the world and society.

Our Corporate Governance and Sustainability Committee aims to enhance the company's sustainability performance by overseeing corporate governance policies and practices. It also contributes to ensure appropriate governance by monitoring sustainability efforts at the board level.

Like part of our risk management efforts, we examine sustainability risks through the implementation of an Environmental, Social and Governance Risk Register. We categorize company risks into 6 main categories: HSE-CS risks, compliance risks, reputation risks, operational risks, financial risks and strategic risks. We establish governance mechanisms for these categories to systematically manage corporate risk activities.

At SOCAR Türkiye, we conduct all our activities with a consciousness of our responsibilities to the environment and society. We work towards a brighter tomorrow with today's energy.