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Business Sustainability: Which Taxes Are Starting to Govern It

Over the past decades, it has become evident that we need a new economic model that guarantees a fairer social balance and has a limited impact on the environment.

With that goal in mind, business sustainability is becoming a priority in the business plans of both small and large companies.

Business sustainability refers to companies that create economic, social, and environmental value in the medium and long term to contribute to the well-being of the communities they operate in and future generations

Sustainable businesses don’t seek only profitability; they also care about protecting the environment and ensuring a more equitable distribution of resources and profits.

In a market where consumers increasingly value brand practices and commitment, businesses with sustainable practices have a competitive advantage. Having a sustainability strategy improves brand image, attracts more investors, increases productivity, and reduces costs through saving and reuse measures.

Entering the sustainability realm is crucial nowadays if we want to compete against major brands that have made this method their business structure. Having a professional to assist us at this stage can make a difference. One of the most reliable options is a CPA in Houston called Evans Sternau, a global network of committed CPAs and accountants that focuses on providing customer service strategies and resolving industry challenges.

However, there’s another aspect we must consider: regulation. Regulation on these matters is evolving globally, and tax measures are beginning to emerge.

Those handling the tax area in organizations play a pivotal role in this transformation, as changes in strategies and operations have associated tax consequences that need to be evaluated. Consultancies like Evans Tax Service can help you understand the method we are adopting and how it will impact our company’s daily economy.

Today, there are taxes designed for fuels, water, plastics, and waste materials, all aimed at protecting the environment. Apart from taxes, there’s a plethora of increasingly numerous ecological incentives that could affect asset allocation, product development, and overall strategic planning.

Keys to Achieving Sustainability Goals

Despite the importance of the topic, tax leaders in companies aren’t present when key strategic decisions are made.

Every corporate strategy decision regarding sustainability goals must carefully consider taxes and incentives. Without understanding these two aspects, it will be challenging for companies to present the strongest business case.

There are five simple steps that tax leaders in companies can follow to boost sustainability performance in their organizations.

Identify the Tax Implications of the Company’s ESG Strategy

Compliance and reporting are key activities, but it’s also essential to go a step further and bring tax incentives, saving opportunities, and other sustainability-related benefits to the table.

The tax team should help the company understand the tax implications of new sustainability-related processes and technologies.

Environmental sustainability strategies often involve investments, which can offer significant tax-saving opportunities. Additionally, they contribute to generating necessary positive externalities for benefits.

Understand the Tax Implications of the Company’s Value Chain

For many companies, meeting aggressive carbon and climate change goals will mean making profound operational changes. As always, these business transformations will have tax consequences, making them operate in multiple jurisdictions. This entails dealing with an increasingly complex tax landscape as more regulations and taxes are introduced.

When it comes to changes in the value chain, it’s essential to advise companies on risks and how to address them, but also highlight opportunities through credits and subsidies that can expedite the process.

Prioritize Tax Transparency

As new tax policies and reporting requirements arise, taxes can set key performance indicators to facilitate transparent disclosure and reporting.

Tax leaders should also look beyond the company to proactively collaborate and engage with legislators, peers, and regulators to influence tax policy.

Transform the Tax Operating Model of ESG

Depending on the industry, sustainability will impose new and significant talent demands on the tax function and will require new skills. From indirect and transfer taxes to assessing the impact of new carbon reduction technologies, modeling potential scenarios, and analyzing government policies.

Tax leaders can consider enhancing skills and diversifying roles in their teams, acquiring new talent, increasing automation, and outsourcing or partnering to access the capabilities needed to meet growing needs.

The focus on transparency and the resources required to support sustainability provide an incentive to free up resources by using digital and artificial intelligence technologies to automate routine tasks like compliance and filing processes.

Align Taxes and ESG Responsibilities

Sustainability touches on many aspects of the company, and some of these areas may involve taxes that go beyond the traditional mandate of the tax function.

Therefore, it’s crucial to establish who is responsible for ESG tax matters and ensure they have the appropriate level of oversight in areas where they don’t have daily control.

Sustainability measures impact all aspects of the business. Tax leaders who help bridge tax aspects with business strategies and financial decisions will bring greater value to their organizations.