GRI: Joining the dots between tax and the SDGs

24 October 2023

Under the ESG umbrella, all tax matters of a company relate to ‘governance.’ However, defining good governance can be challenging due to a number of existing differences in approaches among jurisdictions.

Our latest podcast sheds light on the role of tax transparency

What are the tax responsibilities of a business from a sustainability perspective – and why is ethical tax decision-making increasingly important for risk management?  

These are some of the questions addressed by internationally renowned speakers in the new episode of The SDG Insider – the podcast series from GRI that dips beneath the surface of corporate reporting and the Sustainable Development Goals (SDGs).  

Episode 4: How transparent tax reporting can build trust – and a more equal society 

The episode explores the crucial role of comprehensive and comparable tax reporting while examining what this means for building trust within society and fostering a more equitable world through the SDGs. 

Alison Tailor, Executive Director at Ethical Systems, and Dave Reubzaet, Tax and Sustainability Director at Deloitte (and a former GRI’s Capital Markets Director), discuss tax responsibilities of corporations through an ESG lens. 

Under the ESG umbrella, all tax matters of a company relate to ‘governance.’ However, defining good governance can be challenging due to a number of existing differences in approaches among jurisdictions. Notably, the United States have grappled with questions on whether an ESG focus might conflict with the directors’ fiduciary duty to the corporation, which traditionally only emphasizes the interests of its shareholders. 

In 2021, the climate change emergency prompted the US Securities and Exchange Commission (SEC) to mandate the creation of climate-related ESG disclosures, which have since expanded beyond climate. For tax, a pivotal moment occurred in 2022 – when Amazon investors demanded transparency on the company’s tax practices. When these demands were subsequently challenged, SEC was not supportive of any objections, thus affirming the importance of addressing tax within the context of corporate governance. 

This example illustrates the contentious nature of corporate tax issues within ESG topics. While businesses highlight their successes in managing environmental and social issues and contributions to the communities and economies where they operate, often these same companies use aggressive tax strategies that result in minimal or even no tax payments in these jurisdictions. While optimizing tax base or avoiding taxes can technically be legal, such behavior can be linked to the lack of fundamental ethical obligations of business to society. 

Margarita Lysenkova, GRI’s Senior Manager – International Policy, said: 

“As the world entered a new decade in 2020, regulatory pressure to address negative business impact on society has intensified, giving rise to policies such as the OECD’s Inclusive Framework on Base Erosion and Profit Shifting and the EU's public Country-by-Country (CbC) Reporting Directive. The US government is also considering setting a minimum corporate tax rate. There is mounting evidence that corporate responsibility in taxation is becoming the next big ESG frontier. 

While some businesses may wait for tax reporting to become mandatory, others are taking proactive steps to address tax issues beyond what is legally required of them. As the first global public reporting standard for tax transparency, GRI 207 enables any company to disclose its tax practices in an effective and comparable way, thereby responding to stakeholders' demands for transparency and reinforcing the importance of responsible tax practices from a sustainable development standpoint.” 

The GRI Topic Standard for Tax (GRI 207: Tax 2019) is freely available for download. 

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