How your organisation can meet new tax and sustainability mandatory reporting, overcome data gaps and build a competitive edge.
As global corporate regulations continue to evolve, organisations find themselves at a pivotal moment. That’s because companies with a global footprint must expand and digitally evolve the way they collect, report and track data to meet the requirements imposed by three new international regulations: the Organisation for Economic Co-operation and Development (OECD) Pillar Two tax requirements, Corporate Sustainability Reporting Directive (CSRD) standards, and Carbon Border Adjustment Mechanism (CBAM) rules.
Pillar Two, CSRD and CBAM compliance require in-depth access to critical business data, but as PwC’s analysis indicates, leaders don’t have access to the quality data they need to meet the array of new reporting requirements or to inform decision-making across a range of tax and sustainability issues - including the tax contribution of business - that increasingly underpin the enterprise value of their companies.
These new regulations are part of a broad effort by policymakers worldwide to foster a more socially and environmentally sustainable future. But in the process of meeting compliance, enterprises can use this as a prime opportunity to build a better data strategy, enhance decision-making, and become more competitive. As PwC analysis shows, the new international regulations are unfolding value-creation opportunities for business—if leaders bring sustainability into their strategies and planning. For instance, sustainability data can point to new business opportunities.
“Many businesses are starting to understand this potential, even as some continue in a compliance-only mindset,” said Renate de Lange-Snijders, Global Sustainability Tax and Legal Services Leader, PwC.
Learn about the rules that will impact thousands of enterprises around the world – and how you can tech-enable your company’s tax, sustainability and operations teams.
Multinational organisations with consolidated revenue over €750M in at least two out of four previous reporting periods are subject to a minimum tax on entities operating in any of the enacting jurisdictions. Pillar Two has already been implemented by over 35 jurisdictions taking effect in 2024, with over 50 expected in 2025. It is designed to create a more equitable and robust international tax framework that limits opportunities for tax base erosion and shifts profits to low-tax jurisdictions. According to the framework, also known as “Pillar Two,” top-up taxes will be due if the jurisdictional Pillar Two ETR is below 15%.
To comply with Pillar Two, CFOs and tax teams must report on over 330 data points (PDF) (file size: 4.8 MB) from fragmented systems and for each constituent entity across the organisation. Many data points required for Pillar Two calculations are stored in local subsidiary subledgers, HR systems, offline workpapers, and legal entity management systems, among others. These systems are often not synced to the central ERP or consolidation software.
“Pillar Two is the largest change to global corporate taxation in decades and it significantly impacts the way enterprises forecast, model, and report taxes. If companies don’t change their IT landscape for tax purposes, tax teams will continue to scramble to collect data from a patchwork of repositories and manually feed spreadsheets to meet compliance requirements.”
Laura Olsen,Principal, PwC USCommitted to helping organizations streamline the process of reporting Pillar Two data requirements, PwC recently unveiled new Pillar Two data processing services to support organisations currently using Oracle Cloud systems for ERP/EPM and those who’d like to optimize their data leveraging the Oracle platform.
“PwC designed a comprehensive solution to enhance Oracle Fusion Cloud Enterprise Performance Management (EPM), enabling companies to streamline and standardize the collection and reporting of essential tax data,” described Christina Becker, Director, PwC US.
The Pillar Two capabilities PwC has built for Oracle clients include:
“PwC developed an innovative solution to enable companies to collect required datapoints for Pillar Two in an easy user-friendly way,” said Marleen van Buren, Director, PwC Netherlands.
PwC's industry knowledge extends to helping tax and finance leaders ensure they are able to fulfill Pillar Two compliance requirements when using Beacon, an international tax platform featuring the Pillar Two Engine. The Pillar Two Engine is available as a SaaS solution and is actively being used by PwC to assist clients with Pillar Two calculations for provision, compliance, and reporting. The Pillar Two Engine enables businesses to stay ahead of legislative developments and manage global tax complexities and will be instrumental in meeting global and statutory compliance obligations.
Equally challenging are the new sustainability reporting standards rolled out internationally by the European Union’s Corporate Sustainability Reporting Directive (CSRD), which make it mandatory for businesses operating in the EU to disclose over 1,000 ESG-related data points from a myriad of business functions. CSRD mandates disclosure of greenhouse gas emissions, water consumption, biodiversity loss, and human capital within one’s own operations and throughout the value chain, and more, pending materiality determinations.
According to the European Commission, the new rules apply to nearly 50,000 companies, including US companies with EU subsidiaries and all companies with securities listed on EU-regulated markets. Currently, many F500 companies publish annual voluntary sustainability reports, but it’s often a manual process covering a limited scope. CSRD is a different ball game. It stands out for its scope and complexity.
“CSRD reporting requires granular disclosures covering a host of sustainability topics, including the full value chain and assurance. It’s a monumental task that will force enterprises to re-engineer and inevitably digitise processes to comply with the directive.”
Paras Sachdeva,Director, PwC USIn this context, sustainability teams must act quickly. “Companies that have not completed upfront CSRD scoping should consider accelerating this task now,” said Renate de Lange-Snijders, Global Sustainability Tax and Legal Services Leader, PwC. “Only then can they fully understand the data challenge they are facing—and be able to make concrete plans. Interacting with industry peers and partners can illuminate how others are approaching less-familiar aspects of the new reporting standards, such as double materiality.”
To help companies meet this looming deadline, PwC recently launched sustainability reporting capabilities for the Oracle Cloud platform that allow them to identify relevant European Sustainability Reporting Standards (ESRS) metrics, entity specific disclosures, data availability gaps, and automate data collection and reporting. By syncing PwC’s reporting capabilities to Oracle’s enabling technology, sustainability teams can efficiently extract and report data to meet compliance.
Another regulatory aspect that has become top-of-mind for companies operating in Europe is the Carbon Border Adjustment Mechanism (CBAM), an effort to fairly price carbon emitted during the production of carbon-intensive goods that are entering the EU. Designed to encourage cleaner industrial production in non-EU countries, CBAM is a regulatory mechanism enacted in 2023 that can impact companies in its definitive regime effective beginning in 2026.
To comply with CBAM disclosures, companies exporting to Europe must be able to declare both direct and indirect emissions embedded in their goods and surrender the corresponding number of certificates each year. Starting on January 1, 2026, declarants will be required to submit annual reports and purchase CBAM certificates.
This is more complicated than it seems. The reported emissions must be specified for each supplier, for each type of imported good in scope of CBAM, including data on the quantity of CBAM goods imported and any equivalent carbon price that was paid abroad. This information needs to be provided on a per-product and per-production installation basis. This requires in-depth data across the entire supply chain, and unless companies collect this data in advance, CBAM compliance will impact their ability to import goods.
Companies not only need to automate the collection of emissions data within their operations, but they also need to gather and standardise the information from the suppliers, all in an efficient and timely manner. The new PwC sustainability reporting capabilities can also help the C-suite comply with CBAM requirements.
“Building off of Oracle’s existing reporting capabilities, the capabilities launched by PwC are a holistic tool to help sustainability teams in this evolving regulatory environment. By syncing PwC’s CBAM reporting to Oracle’s enabling technology, CSOs and COOs can efficiently assess data gaps and automate reporting.”
Jeff Spector,Principal, PwC USClimate and sustainability regulations are also gaining momentum in the United States, where additional reporting rules are poised to change the landscape of climate reporting.
First, in 2022 the Securities and Exchange Commission (SEC) proposed climate-related disclosure rulesOpens in a new window designed to enhance public company disclosures regarding the risks and impacts of climate-related matters. These new rules are currently under legal stay. Then on June 26, 2023, the International Sustainability Standards Board (ISSB) issued its first two sustainability reporting standards - IFRS S1 and IFRS S2 (PDF)Opens in a new window. Additionally, on October 7, 2023, California Governor Gavin Newsom signed three landmark climate disclosure billsOpens in a new window impacting over 10,000 US companies — including both public and private companies as well as subsidiaries of non-US headquartered companies.
Regardless of where your organisation is on its Pillar Two and sustainability journey, there are steps your CFO, CSO, COO and ESG controller should take now to adapt to these mandatory requirements. Establishing a robust data strategy should be your organisation’s top priority, followed by a close assessment of the data readiness, how your ERP and other cloud platforms collect this data, and how you can simplify the reporting process.
PwC can help you through this journey. Relying on extensive tax and sustainability consulting knowledge, and leveraging Oracle Cloud technology, our team is ready to help you navigate the changes necessary to comply with Pillar Two, CSRD, CBAM and other reporting rules.
PwC is leveraging the Oracle Fusion Cloud Applications Suite to unveil new implementation and consulting services to help global businesses simplify and automate the data consolidation and reporting processes to address new reporting standards.
Beacon tax is a global tax management platform that helps increase efficiency and consistency in tax analysis and reporting, including Pillar Two compliance.
As ESG reporting requirements evolve, here’s what US companies need to know about the EU Corporate Sustainability Reporting Directive (CSRD).
PwC professionals can help you assess whether you are in scope and the likely impact of Pillar Two.
