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Tax reflects a business’s contribution—sometimes its largest one—to society. It is also a value driver in delivering on the business’s environmental, social and governance (ESG) goals. Together, these traits put tax considerations at the heart of any business’s ESG transformation.
Governments around the world are shaping national net-zero strategies, and broader plans for a sustainable society. Increasingly, their focus is on policy levers such as incentives for low-carbon technologies and upskilling employees. On the other side of the equation, they use taxes to encourage emissions reductions and development of a circular economy. In response, business leaders are reviewing how their tax strategies might need to adapt to support a transformation in operations, investment outlook and employment practices.
Pressure for change is also coming from investors and consumers, who expect businesses to embrace sustainability and increase tax transparency. New legislation and regulation will keep elevating the importance of building a clear plan to manage tax reporting and transparency in a way that builds trust with key stakeholders.
All of these changes mean that, increasingly, companies today are viewing their tax strategy through an ESG lens. This means considering tax implications for every part of the business, from finance to supply chains to employment and more.
Many organisations are at an early stage in thinking about how green taxes and incentives impact net zero and climate targets. Currently, many do not have clear visibility of the costs of complying with green taxes or of the potential benefits of green incentives. Our Green Taxes and Incentives Tracker is a starting point to help provide insight so you can factor the impact of green taxes and incentives into your overall corporate climate and business strategies.
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Confronting climate change effectively—and quickly—will require new business models and new investment priorities. Businesses must be ready to comply with new climate-related regulations and reporting requirements, and to meet the rising expectations of investors and consumers. These changes have potentially significant tax implications that will cut across all lines of business. PwC’s global capabilities in tax, reporting and governance will help you navigate these challenges successfully.
As society’s understanding of the ESG context deepens, businesses are making bold commitments to change. Investors are seeking to manage evolving risks and finance new solutions. And stakeholders want to be confident that the businesses they deal with are responsible and profitable. Changes in reporting can include local requirements for workforce assurance, national standards for carbon reporting or international trade regulations. All of these can have tax implications.
We work with organisations to build stakeholder confidence and to make reporting robust, credible and transparent.
Stakeholders today expect businesses to do more than generate returns here and now; they want businesses to create sustainable value for the future. By encouraging businesses to take a longer-term view of their markets, business strategies, investments and assets, ESG provides a real opportunity to invest in the future. Whatever kind of deal you’re considering, we can help you identify tax risks and opportunities, advise on negotiating strategies and enable you to create a tax approach that builds sustainable value.
Managing the ESG implications of deals and investments can involve:
ESG considerations touch many aspects of the people and workforce strategy, including human rights, diversity and inclusion, and incentives and rewards, particularly at the executive level. The COVID-19 pandemic, for example, highlighted many existing workforce challenges such as inequity. It also raised the profile of new models of working—such as home-based and hybrid working—that can contribute to a business’s net-zero goals. To continue transforming the workforce for a more sustainable future, businesses will need to reexamine their employment policies, training programs, reward and recognition programs and much more. Our global team of professionals with expertise across every aspect of human capital issues can help.
Areas where organisations might need to examine the implications of a breadth of people policies through an ESG lens include:
Turn ESG theory into action: From meaningful change to measurable value.