Given the evolving landscape and dynamics of capital markets today, adherence to corporate governance principles has become an increasingly more important and critical issue for Tofaş. Tofaş complies with the Corporate Governance Principles set forth by the Capital Markets Board (SPK) and continually updates its corporate governance practices as may be needed to keep them aligned with changing conditions.
Tofaş embraces corporate governance as a core element of its corporate culture and continuously conducts its operations accordingly. Tofaş is committed to upholding the principles of transparency, accountability, fairness, and responsibility, as defined by the SPK Corporate Governance Communique. Consistent with its emphasis on sustainability, the company integrates these principles into all of its corporate governance practices
Capital & shareholder structure
Shareholders controlling more than a 10% interest in the company
Pursuant to SPK authorization 532 dated 1 August 1991, Tofaş is subject to the provisions and requirements of the Turkish Capital Markets Law’s (CML) Registered Capital System. As of 31 December 2022, the company’s SPK-authorized registered capital ceiling was TL 1,000,000,000. This ceiling is valid for five years (2021-2025). During the five-year period ending on 31 December 2025, the Tofaş Board of Directors is authorized, subject to the provisions of CML, to take decisions on matters pertaining to increasing its paid-in capital up to the TL 1 billion ceiling by issuing new ordinary, preference, premium, and/or below-par-value shares on such occasions as it may deem necessary.
Tofaş paid-in capital as of 31 December 2022 was TL 500 million.
Shareholder |
Share Group |
Share Amount (TL) |
Voting Right |
Share Ratio (%) |
FCA Italy S.p.A. |
D |
189,279,856.87 |
18,927,985,687 |
37.8560 |
Koç Holding A.Ş. |
A |
187,938,121.26 |
18,793,812,126 |
37.5876 |
Temel Tic. ve Yat. A.Ş. |
A |
175,693.44 |
17,569,344 |
0.0351 |
Koç Family |
A |
1,166,042.17 |
116,604,217 |
0.2333 |
Others |
E |
121,440,286.26 |
12,144,028,626 |
24.2880 |
Total |
|
500,000,000.00 |
50,000,000,000 |
100 |
At ordinary and extraordinary general assembly meetings, shareholders exercise their voting rights based on the total nominal value of the shares that they control. At general assembly meetings, votes are normally cast openly however a secret ballot may be held if shareholders controlling at least 20% of the shares present at a meeting so request.
Share Information
With their average trading value up by 121% in 2022, Tofaş’s shares significantly outperformed the 98% rise in Borsa İstanbul’s BIST 100 index last year. On the basis of their twelve-month performance however, Tofaş shares gained 138% in value in 2022 while the BIST 100 index was up by 197%.
IPO: |
1 July 1991 |
Ticker symbol: |
TOASO |
Paid-in capital: |
TL 500,000,000 |
Registered capital ceiling: |
TL 1,000,000,000 |
2022 trading highlights |
|
Closing: |
TL 165.70 |
Market capitalization: |
USD 4.43 billion |
Intraday high: |
TL 170.20 |
Intraday low: |
TL 58.95 |
% held by international investors: |
22.4% |
Average trading volume: |
USD 67.6 million |
As of end-2022, 22.4% of Tofaş’s shares were held by foreign shareholders while the average foreign-investor share of BIST-traded companies was 29.6% as of the same date.
Tofaş shares are traded in the following market and included in the following indices:
BIST SUSTAINABILITY INDEX / BIST ALL / BIST INDUSTRY / BIST 30 / BIST 100 / BIST Bursa / BIST STAR / BIST CORPORATE GOVERNANCE / BIST Dividend / BIST METAL PRODUCTS, MACHINERY / BIST 50
Tofaş Board of Directors
The Tofaş Board of Directors consists of ten members, two of whom must be independent directors. The roles of board chair and company CEO are held by different individuals. The only member of the Tofaş Board of Directors with executive duties is the CEO, who reports solely and directly to the board. The Board of Directors is responsible for the conduct and oversight of the company’s affairs and business. Its members are elected by the general assembly of shareholders subject to the requirements of the Turkish Commercial Code and SPK regulations. There must be an even number of boardmembers but no fewer than eight and no more than twelve.
For board of directors meetings to be held, a majority of its membership must be present; for a board decision to be valid, a majority of members present must vote in favor of it. For a board resolution to be passed, the presence and affirmative votes of at least 2 non-independent members nominated by Group A shareholders and of at least 2 non-independent members nominated by Group D shareholders are required. All other applicable requirements as mandated by SPK Corporate Governance Principles are binding.
Half of the seats on the Tofaş Board of Directors must be filled from among candidates nominated by Group A shareholders and the other half from among candidates nominated by Group D shareholders. Group A and Group D shareholders must each nominate one candidate who satisfies the independent-director requirements of SPK regulations.
Tofaş’s goal is to achieve age, gender, race, nationality, and ethnic background diversity in the composition of its Board of Directors. The text of the Tofaş Board of Directors Diversity Policy that went into effect on 31 January 2022 may be found at https://www.tofas.com.tr/en/Sustainability/Policies.
Both the number of independent directors and their qualifications are determined in accordance with the regulatory requirements of SPK Corporate Governance Principles. All of the members of the Audit Committee, 40% of the members of the Corporate Governance Committee, and half of the members of the Risk Detection Committee are independent directors. All members of the Tofaş Board of Directors are elected to three-year terms of office and are eligible for re-election.
Duties, Authorities and Limit of Authorities of the Board of Directors
Tofaş Board of Directors members’ CVs are published in the 2022 annual report and may also be found on the company’s corporate website at www.tofas.com.tr.
Information about the Tofaş Board of Directors’ activities and operations during the reporting period are presented in the 2022 annual report.
Tofaş Board of Directors Committees
Within the Tofaş Board of Directors there are three committees (Corporate Governance Committee, Risk Detection & Risk Management Committee, Audit Committee) and also one board (Board of Ethics).
The Corporate Governance Committee, the Audit Committee, and the Risk Detection & Risk Management Committee, all of which report directly to the Tofaş Board of Directors, play an important role in the effectiveness of the board’s activities. The duties of the Nomination Committee and the Remuneration Committee may also be carried out by the Corporate Governance Committee.
The Board of Directors has overall responsibility for the conduct of risk management processes at Tofaş while the Audit Committee and the Risk Detection Committee are responsible for the fulfillment and execution of risk-management processes as required by applicable laws and regulations. Corporate risk strategies are determined in line with reports submitted to the Board of Directors.
Information about the Tofaş Board of Directors committees’ activities and operations during the reporting period are presented in the 2022 annual report.
Tofaş Senior Management
As of the reporting date, Tofaş’s senior management consisted of a chief executive officer and eighteen senior executives.
The company’s CEO and senior executives are responsible for:
Tofaş senior executives’ CVs are published in the 2022 annual report and may also be found on the company’s corporate website at www.tofas.com.tr.
Remuneration Policy for Top-Level Managers and Members of the Board of Directors
This policy document defines the remuneration system and practices for the members of the board of directors and top-level managers with administrative responsibilities as defined by CMB regulations.
Fixed wages payable to members of the board of directors are designated by the ordinary general assembly every year.
Executive board members are paid in accordance with the policy applicable for top-level managers and detailed below.
Within the frame of the Corporate Governance Committee’s judgment, additional benefits can be provided to members who are assigned with the performance of certain roles for supporting the Company’s operations by virtue of the functions they undertake, which will be in addition to the fixed remuneration determined by the General Assembly.
Performance-based payments are not used for remuneration of independent members of the board of directors.
Members of the board of directors are paid based on the period from assignment to resignation. Expenses of the members of the board of directors related with the benefits they provide for the company (transportation, telephone, insurance, etc.) are covered by the company.
Remuneration for Top-Level Managers consists of fixed and performance based components.
Fixed wages of Top-Level Managers are determined in accordance with international standards and legal liabilities based on macroeconomic market data, wage policies applicable in the market, size of the company, long-term objectives and individual positions.
Bonuses payable to Top-Level Managers are based on bonus base, company performance and individual performance. The criteria are as follows:
Bonus Base: Bonus Base is updated every year and varies according to the positions of managers and volume of business. Bonus base is updated based on the top-management bonus policies applicable in the market.
In case of resignation of a top-level manager, a certain amount of bonus can be paid based on the term of assignment, term of assignment as a top-level manager, benefits provided, last target bonus before resignation, wages paid in the last year and bonus data.
Total amounts paid to Top-Level Managers and Members of the Board of Directors based on the principles listed above are submitted to the information and/or approval of the shareholders at the next general assembly meeting.
This is to inform our esteemed Shareholders.
Tofaş takes a holistic approach to risk management that is mindful of risks across all three dimensions: economic, environmental, and social. The conduct of the company’s operations is informed by the principles of “Safeguarding corporate assets and values”, “Protecting commercial, financial, and operational reputation”, and “Ensuring corporate risk management sustainability”.
Tofaş management is responsible and accountable for all the financial, commercial, operational, and organizational aspects of managing corporate risks and of taking and implementing all necessary internal audit and control measures.
The company’s operations are managed proactively giving careful consideration to the extent to which risks and risk-related financial, commercial, and operational outcomes will impact Tofaş. Tofaş management takes a five-step approach to risk identification and assessment in order to manage risks in a systematic way. These five steps are:
1. Identifying risks
2. Quantifying risks
3. Assessing risks
4. Reducing or transferring risks
5. Monitoring and reporting risks.
Under Tofaş Risk Management Policy, risk management activities at the company are reported to the Board of Directors as required by laws and regulations. Risk reporting guidelines were determined after an evaluation of Tofaş’s risk management system by a committee that was set up specifically for that purpose.
Sustainability-Based Risk & Opportunity Analysis
|
Risks |
Opportunities |
Economic |
Debt-repayment risks The primary financial consequences of these risks manifest as market losses that are attributable to shifts in market expectations |
Direct-debit system Internal control system Increase the number of Tofaş R&D Center’s EU-supported research projects |
Environmental |
New EU CO2 emission regulations requiring 30-50% reductions in CO2 emissions by 2030 Potential sales or production losses due to compliance with national and international laws and regulations |
Tofaş has a structured production system which is aligned with SPW (Stellantis Production Way, one of the highest global manufacturing standards today) and which encourages sustainable, systematic improvements and energy-conservation projects aimed at eliminating losses. Tofaş develops and deploys production process solutions that focus on reducing fossil-fuel use, further reducing energy consumption, and reducing overall environmental impact |
Social |
No medium or long-term risks |
Tofaş strives to promote environmental and climate responsibility and awareness across its value chain through supplier and dealer development initiatives and customer education services Tofaş engages with all stakeholders by actively encouraging them to continuously contribute suggestions and by implementing suitable changes based on stakeholders’ input |
|
|
While bolstering the sustainability and efficiency of its operations, Tofaş also ensures the credibility of operational reporting through rigorous internal audits. The company ensures management accountability and sustainability through the deployment of effective control mechanisms.
The Tofaş Board of Directors Audit Committee is responsible for the oversight of the company’s internal control and internal audit systems. The committee proactively addresses foreseeable financial, commercial, and operational risks etc as well as those associated with corporate risk management. The committee also considers and determines whether or not the company is fulfilling its statutory obligations with respect to internal control, internal audit, and risk management.
The Audit Committee reports to the Board of Directors all action that is taken to improve, based on its own assessments, the effectiveness and functions of internal control systems.
Seeking to directly understand its customers’ quality expectations, Tofaş strives to raise the quality of its manufacturing and service processes and to maximize its quality competitiveness throughout its value-creation chain. The company’s quality management system is regularly updated and improved in light of changes in customers’ expectations.
In line with its customer satisfaction-centric sustainable quality approach, Tofaş strives to improve its quality indicators consistently every year. As a result of its quality management efforts, in 2022 Tofaş ranked among the top three Stellantis system plants rated on the basis of their production excellence for the third year in a row.
For the 2022 survey and review, Stellantis published a new standard in which customer-assessment criteria were made uniform throughout the entire group. As a result of the huge improvement in its customer-assessed quality metric last year, Tofaş emerged from the year’s evaluation as one of the top performers across the entire Stellantis ecosystem.
Under a new testing standard introduced in 2022, upon leaving the factory all vehicles are subjected to short-track testing under conditions that mimic average-customer use. By ensuring that only defect-free vehicles are supplied to customers, this practice increases customer satisfaction. According to the results of independently-conducted new car buyer surveys, in 2022 the Fiat Egea’s sedan and wagon models ranked in the top quartile with the highest quality scores.
A 2022 upgrade to the highest currently-available level in the next-generation Statistical Process Control (SPC) system used at the plant has significantly speeded up measurement processes and resulted in a doubling of the frequency with which vehicle bodies are measured. Measurements by multiple coordinate measurement machines (CMM) now require only a single SPC unit. The ability to examine body-scan results in real time also increases diagnostic capabilities.
In 2022 Tofaş underwent and successfully passed the second interim review audits of its integrated ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018 standard certifications without any instances of nonconformity being reported.
The results of these audits show that Tofaş is especially strong in the following areas:
Taking and following up corrective action to deal with integrated quality management system nonconformities
Successfully undergoing and passing the conformity of production audit conducted by the Italian transportation ministry in 2022, Tofaş’s certificate of conformity has been renewed for another three years. Ministry representatives conducting the audit said they were impressed by how the notion of quality from an end-user’s perspective had been incorporated into all of the plants processes and options.
In 2022 Tofaş’s quality department organized six on-campus meetings under the company’s university-industry collaboration program. During these meetings, students and newly-hired employees were provided with information about Tofaş’s automotive industry, worklife, quality, digitalization, and industrialization processes, knowledge, and experience.
Tofaş’s commitment to the advanced business ethics that are part of the bedrock of its corporate culture inform all of the company’s activities and operations. This means that ethical behavior of the highest sort is an essential priority and responsibility of every Tofaş employee. However not only Tofaş employees but also Tofaş dealers, suppliers and business partners, and all other stakeholders with whom the company actively engages are likewise expected to abide by the company’s ethical guidelines.
The Tofaş Board of Ethics is responsible for the implementation of the Tofaş Code of Ethics and for overseeing compliance with its rules. Tofaş adheres to a no-tolerance approach when dealing with matters involving bribery and corruption. The company is committed to undertaking its activities fairly and honestly in line with legal and ethical guidelines. In all of the policies and procedures that it formulates, Tofaş strives to be in full compliance with the requirements of laws and regulations, with ethical and professional standards, and with universally-recognized principles. Within this scope, risks of bribery and corruption are identified and actions are taken to reduce them. Compliance with company ethical guidelines is supported by means of in-house group training sessions, regular ethical guideline announcements, and online training resources.
The 10th principle titled “Anti-Corruption” of the United Nations Global Compact to which Koç Holding, one of Tofaş’s major stockholders, is signatory, is an indispensable part of Tofaş’s approach to business ethics and anti-corruption.
All forms of discrimination be they based on language, race, gender, political affiliation, religious belief, or similar considerations are prohibited in the conduct of business and workplace relationships at Tofaş. Work agreements between the company and its employees may not incorporate any terms or conditions which, directly or indirectly, would subject an employee to prejudicial treatment on the grounds of gender or pregnancy at the time the agreement is entered into, while it is in effect, or when it is terminated except in cases where job-related risks, employee safety, or the requirements of law dictate otherwise. The principle of “Equal Pay For Equal Work” applies to everyone and no employee may be paid more or less based on their gender. All hiring, assignment, and promotion decisions must be based on objective performance criteria and never on such considerations as language, religion, gender, race, or the like. Tofaş condones neither the employment of children nor any form of forced or compulsory labor.
Tofaş’s top priority is to maintain a continuously improving, value-creating management model that takes full account of the social, environmental, and economic impact of all of its activities and operations. The CEO and all members of the Tofaş Board of Directors have committed themselves to a sustainability-focused management approach.
The Tofaş Corporate Sustainability Policy is based on an integrated approach and on business models aligned with sustainable future strategies. Tofaş’s corporate sustainability policy is approached and implemented both locally and nationally in ways that demonstrate the company’s responsibilities towards its stakeholders. Tofaş’s sustainability approaches and practices are dealt with holistically, with input from all stakeholders being solicited and considered.
Tofaş’s Corporate Sustainability Policy is based on the three pillars of environmental, social, and corporate governance embracing the following principles:
Under the heading of “Governance & Sustainability”, the foregoing principles are treated as essential elements of the company’s corporate governance structure and of its risk management, business ethics & anticorruption, sustainability management, and stakeholder engagement practices. Tofaş’s sustainability policy applies to all aspects of social, ethical, and environmental management. It is based on stakeholder participation and takes into account stakeholders’ satisfaction and expectations. The company’s sustainability and social responsibility initiatives are constantly improved and managed in line with the company’s corporate vision and in light of stakeholders’ priorities.
The management, improvement, and auditing of Tofaş’s corporate, social, and environmental activities as well as the transparent disclosure of its managerial, social, and environmental performance to all stakeholders are key issues for the company. Tofaş’s corporate sustainability policy is informed by these issues. Policy compliance is monitored by the Tofaş Corporate Sustainability Policy Management Committee and all related issues are reported to and assessed by committees subject to the oversight of the Tofaş Board of Directors. Prior to 2022, corporate sustainability reports were published separately. As of that year, they were integrated into the company’s annual reports.
Tofaş Sustainability Committee
The Tofaş Sustainability Committee develops and monitors the company’s sustainability strategies. The Risk Detection & Risk Management Committee oversees the Sustainability Committee to ensure that its strategies are aligned with the company’s overall risk management framework.
Tofaş evaluates whatever risks and opportunities may be identified by any of its units, employees, or other stakeholders. Action to minimize risks is taken as may be necessary. Risk owners are responsible for monitoring the progress of action plans. Based on its evaluation of the importance of a particular issue, the Risk Detection & Risk Management Committee reports directly either to the Corporate Governance Committee or to the Tofaş Board of Directors. Within the same framework, the Board of Directors is kept advised about the company’s sustainability issues and the board evaluates those that are placed on its agenda. The Tofaş Sustainability Committee is responsible for coordinating and reporting all sustainability-related issues overseen by the company’s senior management, departments, and units.
Climate change and risk assessment
Tofaş identifies and assesses climate risks across its value chain. The company then ranks these risks by importance in order to manage them more effectively and comprehensively. Climate risks are assessed by assigning them scores that are based on their financial impact on the company.
The climate risk assessment process begins by identifying and classifying climate risks based on the likelihood of their occurrence and on their potential impact (individually and severally) on the company’s profitability, business continuity, and reputation. Risk factors are initially analyzed together and then prioritized according to their importance. For events that exceed a pre-defined threshold, existing mitigation measures are analyzed and future measures, action plans, and risk owners are determined.
Under the Tofaş risk-assessment methodology, climate-related risks are scored based on their financial, reputational, production, operational, human, and legal impact. The highest of these is defined as the risk assessment score. All risks are assessed on the basis of their impact, likelihood, and time frame. If its calculated score is less than six, the risk is deemed to be acceptable. Risks whose scores are between six and twelve are classified as “Moderate” while those with scores over twelve are classified as “High”. An exception to this rule is made in the case of reputational risks and legal risks, which are always deemed to be “High” whatever their score may be. When scoring financial risks, thresholds are defined for financial losses that are considered likely to have a significant impact on the company. Financial losses below EUR 1 million are deemed to be acceptable.
Climate-related risks
Risk |
Importance |
Explanation |
Current regulations |
***** |
All activities of the Company are managed in accordance with the relevant regulations. At the same time, current and possible future regulations are closely monitored and budgeted regularly every year. |
Potential changes in the legal, regulatory, and policy frameworks |
***** |
Laws, regulations, and government policies (such as those related to improving fuel economy and reducing greenhouse gas emissions) can have a significant impact on the company because they directly affect the company’s operations. Tofaş takes steps to conform to best practices in the mitigation of climate change-related risks and is currently developing plans and readying itself for a low-carbon future. |
Technology |
***** |
Newly-emerging technologies are rapidly changing customer expectations as well as companies’ production processes and business models. Furthermore the autonomous-driving technology landscape is fiercely competitive, with both technology companies and startups vying for market share. Tofaş keeps a close watch on innovations in technology and on changes in the regulatory framework in order to continuously improve its competitive edge. The company continuously adjusts its technology strategies and practices to better meet the changing needs of markets and customers. Tofaş also conducts advanced training programs that give its employees the opportunity to keep pace with new technologies. Tofaş is committed to developing its R&D capabilities in the areas of connectivity, infotainment, powertrain systems, control software, and advanced driver assistance systems. The company is also committed to continuously expanding its operations so as to meet the growing needs of the global automotives software industry. In 2022 Tofaş again continued to work on a variety of technology projects, including research into the autonomous driving technologies that are seen as essential in the transition to a lower-carbon, more energy-efficient economy. |
Legal framework |
*** |
Tofaş closely monitors emerging climate policies around the world and develops compliance plans to mitigate risks that may arise from new regulations. |
Market risk |
***** |
Global environmental, social, demographic, and technological changes are driving the transformation of customers’ mobility needs and expectations. Risks related to changes in those needs and expectations are important because they may result in delays in the development of new technologies and in a failure to create and sell profitable products that address them. Research is regularly conducted to track changing customer needs and trends. To sustainably meet customers’ changing needs and expectations, Tofaş explores new technologies, develops solutions, and creates new sales and service models. To the same end, Tofaş is also working on the development of alternative-fuel vehicles. The company is closely monitoring global electric vehicle technologies and is working to integrate them into its own innovative solutions and applications so that the associated vehicle components and systems may be produced domestically. Tofaş is also contributing to Stellantis’s efforts to promote the use of natural gas and biofuel-powered alternative fuel systems. |
Reputation |
*** |
No conflicts on this issue are anticipated for the foreseeable future. |
Acute physical |
*** |
Nilüfer Çayı, a river that passes within 500 meters of the Tofaş plant, has been identified as a primary flood risk. |
Climate-risk management
Tofaş classifies financial obligations arising from current regulations governing its products and services as “climate-related financial risks”. Changes in the regulatory framework increase Tofaş’s operational costs.
Laws, regulations, and government policies–particularly those related to fuel efficiency and greenhouse gas and exhaust gas emissions–significantly impact the company’s business processes.
R&D resources are budgeted as needed to help minimize climate risks. In order to comply with CO2 and pollutant emission and fuel-efficiency regulations as a member of the Stellantis Group, Tofaş:
Aware of the environmental impact of fuel consumption, exhaust emissions, and reducing vehicle weight, Tofaş engages in extensive research and development in these areas. For example Tofaş’s weight-reduction design R&D focuses on vehicle cross-section and topology optimization as well as on high-strength/lightweight materials and hybrid solutions.
Responding to changing customer needs and demands, Tofaş also focuses on vehicle electrification and on the development of new mobility solutions.
A strong and unforeseen surge in the demand for low-carbon emission vehicles is regarded as a financial risk because of the potential impact that it could have on the company’s revenues. The primary financial consequence of the materialization of this risk is the loss of potential sales due to an inability to meet market demand. Market research on this issue suggests that Tofaş is at risk of losing approximately 2.5% of its market share on this account.
General awareness of climate change is being raised by the automotives industry’s increasingly greater focus on low-emission vehicles as mobility solutions. Tofaş sees this issue as one of its top developmental priorities. To manage this risk effectively, the company analyzes consumer behavior to pinpoint emerging market trends while also working with unions and employee representatives to increase the flexibility of its production operations. The company continuously monitors market share and trends in consumer demand and analyzes potential scenarios and their financial implications. Tofaş conducts targeted analyses on various subjects such as how consumers feel about ecofriendly vehicles and what impact consumers’ attitudes have on price flexibility, market penetration, and brand reputation. Tofaş is working on innovative solutions and applications of its own with the goal of domestically producing systems and components for electric vehicles that incorporate these technologies. In line with this, a hybrid version of the Fiat Egea was introduced in 2022.
Climate strategy and decarbonization plans
Tofaş uses both the transition and the physical climate scenarios formulated by the Intergovernmental Panel on Climate Change. The company is also a signatory to the “2°C Challenge Communique” published by the Corporate Leaders Group and in December 2022 it applied for admission to the Science-Based Targets Initiative and was accepted.
To protect itself against climate-induced regulatory framework risk, Tofaş makes use of three different scenarios:
The High Carbon-Pricing Scenario envisions policies being put in place that are deemed strong enough to cut greenhouse gas emissions and keep global warming below 2°C by the end of the century. It is based on research conducted by the OECD and by the International Energy Agency (IEA 2017).
The Mid-Level Carbon Pricing Scenario assumes that policies will be implemented to reduce greenhouse gas emissions and limit climate change to 2°C in the long term; however, it posits that immediate action will be delayed. This scenario is based on research conducted by the OECD and IEA as well as on assessments of the adequacy of Turkey’s National Contribution Statement by Climate Action Tracker, Ecofys, Climate Analytics, and the New Climate Team. It assumes that countries whose current climate commitments fall short of the short-term 2°C goal will step up their efforts to reduce emissions in the medium to long term.
The Low Carbon-Pricing Scenario assumes that Turkey will achieve full implementation of its national contribution commitment as defined by research conducted by the OECD and by IEA 2017. The prices generated by this scenario are likely to be too low to meet the goals of the Paris Agreement.
Based on these scenarios, Tofaş may be exposed to carbon-pricing risk on its Scope 1 emissions ranging between USD 1.6-5.6 million a year between now and 2030. The exact extent of this financial risk depends on which aspects of the three scenarios are most valid.
To protect itself against climate-induced physical risk, Tofaş also makes use of three other scenarios:
The High Climate Change Scenario (RCP 8.5) is sometimes referred to as “Business-As-Usual” and assumes that greenhouse gases will continue to be generated at their present rates. Under this scenario, global temperatures are expected to rise by more than 4°C by the end of the current century.
The Moderate Climate Change Scenario (RCP 4.5) assumes that strong efforts will be made to reduce emissions to half their current levels by 2080. Under this scenario, it is more likely that global temperatures will rise by more than 2°C by the end of the current century.
The Low Climate Change Scenario (RCP 2.6) assumes that aggressive steps will be taken to halve emissions by 2050. Under this scenario, global temperatures could rise by less than 2°C by the end of the current century.
Tofaş uses data applicable to its own assets when analyzing climate-change scenarios. Even in a “low” climate-change scenario, we could still see warming of 2ºC by the end of this century. In a “reasonable” scenario, the temperature is expected to increase by something above 2°C by the end of the century, while in a “high” scenario, the increase could surpass 4°C.
Tofaş begins by precisely geolocating each of its impactable facilities. Based on its location, a facility is then matched with seven different climate-change hazards. Once the matching is complete, the facility’s overall climate risk exposure can be measured. This information is used as input when determining the company’s corporate or collective physical risk scores.
Just as it also does in transition-risk analyses (particularly those involving market risk and regulatory risk), Tofaş considers physical risk scenarios looking as far ahead as 2050.
For purposes of assessment, risks such as water stress, flooding, heatwaves, cold snaps, severe storms, forest fires, and rising sea levels are taken into account.
Climate change is expected to increase both the severity and the frequency of such natural hazards and put Tofaş’s physical assets and ongoing operations at increasingly greater risk. Tofaş’s Risk Management Policy aims primarily to prevent and minimize losses that could lead to operational disruptions and/or cause the company material damage. Based on risk assessments, annual investment and maintenance budgets are adjusted so as to lower the associated risk scores.
In 2021 Tofaş set a target of a total of 102,917 tCO2e for Scope 1 and Scope 2 emissions and committed itself to reducing those emissions by 50% by 2030 (Base-year: 2021). The company’s Scope 1 and Scope 2 emissions in 2022 amounted to 84,871 tCO2e.
Tofaş is a corporate member of the Climate Platform and supports the transition to a low-carbon economy through its energy efficiency initiatives. The company is developing solutions to cut energy consumption in its production processes, with a particular focus on reducing the use of fossil fuels. In 2022 these energy-efficiency solutions resulted in total energy savings of 115,055 GJ and in total cost savings of EUR 3.4 million euros. In line with its green procurements strategy, Tofaş also makes a point of prioritizing the selection of more energy-efficient machinery and equipment.
Tofaş continued to reduce energy consumption and CO2 emissions in 2022 in line with its commitment to Stellantis’s World Class Manufacturing methodology. A total of 201 energy-efficiency projects were undertaken in 2022 as a result of which, the company conserved 115,055 GJ of energy and prevented the emission of 9,622 tons of CO2 as of the fourth quarter.
Due to the growing importance of climate change, Stellantis is increasingly focusing on developing low-emission vehicles as mobility solutions. Tofaş supports these efforts and sees this as an avenue for continuous development as it moves forward. Through the Tofaş R&D Center, the company has invested about EUR 58 million on design and testing infrastructure for use in the development and improvement of Tofaş vehicles’ concepts, styling, bodies, interiors, suspension systems, engines, emissions performance, vibration performance, and acoustics performance. The number of EU-funded research projects in which the R&D center has participated has reached 31. The center has worked with more than 260 international partners in the conduct of these projects.
The Tofaş R&D Center aims to steadily increase the number of patents for which it applies by undertaking value-adding innovative projects and exploring innovative ideas year after year. To date, Tofaş has filed more than 71 patent applications as a result of the center’s work.
Tofaş’s approach to risk and opportunity management helps boost its credit rating, which makes it easier to collaborate with investment banks, while its environmental initiatives make it easier to attract capital.
