Three in four tax managers not properly involved in their company’s ESG efforts

That was one of the key findings from a new survey of 500 decision-makers on tax strategy at large British companies, conducted by KPMG and seen exclusively by edie.

As the tax function attempts to contribute meaningfully to the delivery of their business’s ESG strategy, it is facing several barriers. The most common shared challenge, cited by 76% of respondents, was a lack of experienced resource within their teams.

Similarly, 75% cited the high costs associated with implementing better reporting and governance structures.

Another common gripe is a lack of board-level engagement, raised by more than half of those surveyed. This could be cause by either the absence of an ESG strategy entirely, or a lack of clarity on how tax and finance functions support the strategy.

Those surveyed were also asked what regulators and policymakers could do to help tax functions better support the UK’s net-zero journey. The most common ask was for a full review of tax incentives to ensure that they support low-carbon options over high-carbon ones. Professionals also wanted more done to make data accessible to meet disclosure obligations.

KPMG’s Tax and ESG partner sponsor, Carol Newham, said: “Tax and the ESG agenda are inextricably linked. The need for companies to do the right thing by society has shone a light on their tax affairs.

“At the same time, tax is itself an ESG metric. As stakeholders apply an ESG lens to their assessments of businesses, tax strategy, risk management and governance have become important pillars of a firm’s ESG story and reputation.”

Missed opportunities

Unless key barriers are tackled, businesses could face challenges meeting legal requirements on reporting and governance including financial metrics.

Reporting is, of course, not the same as impact. Taking a proper baseline is regarded by many as the first step towards meeting ambitious ESG goals.

As such, businesses unable to properly integrate their tax function into their ESG work could also fall behind in efforts to improve the social and environmental performance of their operations and supply chains.

Those surveyed identified improving supply chain sustainability as their top ESG priority area. Linked to this were ensuring good worker pay and conditions, driving the low-carbon transition and protecting nature.

In-house, tax professionals ranked introducing greener employee benefits packages as their top priority. Such benefits could include schemes to help staff purchase electric cars or bicycles.

Sectors covered by the survey included financial services, consumer goods, energy generation, utilities, life sciences, telecommunications, media, digital technology, manufacturing and defence.