How tax and finance can step up
There’s a clear opportunity here for tax functions to serve as a strategic partner with their businesses — by steering leadership through the maze of global taxes, and helping them identify and capitalize on incentives and other emerging opportunities, all of which will also help align the business with the predominant direction of travel of consumer and investor sentiment.
“The opportunity here is huge,” says Burkert. “If companies approach carbon tax proactively, rather than simply treating it as a cost, it gives them a value — in terms of reputation, standing and demand. It shows they’re aligned with societal needs. This can help to gain new customers, and influence shareholder relationships and perception.”
Another advantage here is that this naturally brings the tax function into direct contact with other areas of the business — a collaboration that may foster greater innovation and help seed new ideas.
“When you’re talking about carbon taxes, it’s not typically a conversation only with the tax director,” says Van Doninck. “The sustainability team will have their own thoughts and their own strategy. This is a unique chance for cooperation.”
Given the scale of the opportunity as well as the challenge, the argument for working with an experienced partner on sustainability and related taxes becomes increasingly compelling. The right partner can help by providing advice, governance and impact assessment on the changing carbon tax landscape, including the potential effect on supply chains. They will have a solid understanding of the macroeconomic trends; of the upcoming regulations and standards; and how all this can be translated into business and operating models.
Meanwhile, the latest technology platforms, such as those harnessed in EY Tax and Finance Operate solution, can draw out the extra value hidden in a company’s carbon data — not just to track and communicate the company’s position, but to help drive better strategic decisions.
Carbon taxes are already here, and they’re becoming more prevalent. Companies need to meet them proactively, rather than sitting and waiting for the tax authorities to come knocking. By doing so, they may position themselves at the forefront of significant economic and societal change.
What begins with compliance soon becomes something much bigger: a chance to leap on to a raft of opportunity, not just in claiming the incentives governments are offering forward-thinking companies, but in standing on the right side of history.
“Investment firms are watching,” says Koch. “Customers are watching, and so are employees. I have interns now that come in because we work on carbon. And this is not unusual. This isn’t just a bunch of new taxes. These are globally important trends.”