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The pressure is rising
On the government and regulatory front, new ESG requirements, legislation and guidelines are coming into force with increasing frequency.
And from the ground up, growing voices from multiple stakeholders put pressure on companies to take action on sustainability measures – voices too loud to be ignored.
It’s no wonder that most C-suites feel a growing urgency to act. But they also feel uncertainty (if not trepidation) about how to formulate and follow through with a sustainability strategy. A common thread is the unfortunate reality that tax as a whole is often not a key part of ESG strategy conversations.
Moving tax from the back office to the boardroom
Tax can – and should – play a significant role in sustainable business practices … more so than most tax departments are doing today. And that applies equally to value creation and funding opportunities like the Inflation Reduction Act (IRA), as well as ESG risk mitigation and governance efforts.
Many tax departments are charged with understanding sustainability tax funding and how it applies to their organization. Still, organizations don’t connect tax with broader sustainability goals.
When it comes to funding, grants and incentives enacted into law, business leaders are often unaware that they may qualify. But this is tax’s sweet spot, including an awareness of the timing/process for disbursements. This means that the business may have access to money through credits and incentives to directly fund sustainability initiatives.
An upcoming EY Sustainability Tax Pulse survey of global tax and finance department leaders found that only 41% of senior tax leaders are “very confident” that their tax function has maximized its use of sustainability tax credits and incentives throughout the supply chain. The same study showed 94% of senior finance and tax leaders reporting that a lack of consultation leads to decreased tax credit eligibility.
Leaders should include tax as part of their sustainability strategy, having a voice in its planning early and often. It can make all the difference in achieving sustainability goals.