Responsible tax is an undervalued sustainability champion

Ahead of speaking at the Purpose Summit in London, Mary Patel, explores how business is championing the sustainability impact of fair tax practices.

Mary Patel
Movement Building and Outreach Manager
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Carbon emissions, plastics use, equality and diversity – all familiar terms to any sustainability or ESG professional. But responsible tax conduct? Despite being a vital contribution made by any business, relatively few companies talk with pride about paying tax fairly and transparently.

Tax hasn’t donned a full superhero outfit, but it’s starting to put the gloves on

A small but growing number of businesses are bringing the social impact of their tax contributions into the spotlight. They include the 250 distinct trading businesses that are currently Fair Tax accredited, from multinational listed firms to private business and social enterprises. Companies increasingly recognise the value of enhanced, independently verified tax disclosures in helping build trust with stakeholders.

But it’s fair to say that these businesses are still the exception. In an international analysis conducted by FTSE Russell in 2021, the findings were stark:

• only a third (34%) of large and mid-sized companies have commitments or policies on tax transparency in place, compared to 87% for climate change and 98% for health and safety;
• barely 12% commit to comply with and follow the spirit of the law;
• just 7% disclose country-by-country breakdowns of taxes paid; and
• a miniscule 3% have a named position responsible for tax policy at board level

Tax plays a crucial role in achieving UN Sustainable Development Goals

This year we stand at the halfway point to the 2030 Agenda for Sustainable Development deadline and the UN describes progress as ‘woefully off track’. At the Fair Tax Foundation we argue that responsible tax, alongside its sister-issue anti-corruption, is foundational to progress across all sustainability goals. As the UN Tax Committee argues: “Taxation is a powerful tool to help finance achievements of the SDGs…Fiscal policies can simultaneously mobilize resources, reduce inequalities, and promote sustainable consumption and production patterns.”

Responsible business agrees. According to Fair Tax Mark accredited AgroFair, a global distributor of Fairtrade and organic bananas, good tax conduct should be at the heart of how businesses demonstrate their commitment to sustainable development: “We believe that paying the fair amount of taxes in the countries where the profits are made, is indispensable if a company, like ours, is seriously committed to the Sustainable Development Goals. The Fair Tax Mark recognizes for the first time this important aspect of fairness of our company.”

For Fair Tax Mark accredited Danish multinational Ørsted, a market leader in offshore wind and supplier of green power to more than 15 million people, it’s also clear: “Tax payments contribute both directly and indirectly to most of the SDGs, in particular target #16.6 on the development of effective, accountable and transparent institutions.”

And Fair Tax Mark accredited SSE plc, a leading UK renewable energy generator, has embedded a commitment to champion fair tax under one of four core 2030 business goals that link directly to the UN SDGs.

Tax and the path to Net Zero

Fair tax contributions and well-targeted fiscal incentives are pivotal in enabling nations to transition to clean energy and reduce carbon emissions. As we point out in our recent paper ‘Why we focus on corporation tax’, corporation tax reliefs can be used to incentivize investment in public goods – such as enhanced capital allowances and depreciation for renewable energy.

SSE’s ‘Talking Tax’ report, itself an exemplar of tax transparency, calls on the wider industry to recognise the importance of fair tax as we transition to a low carbon economy: “Reaching net zero requires existing markets to expand, and creates new markets to deliver the infrastructure and systems the world needs to reduce carbon emissions and limit global warming to 1.5°C. There is a great opportunity for the companies within these markets to fully contribute to the tax system from the outset, and build an industry that does right by society by delivering a better net zero world, whilst paying the correct tax and being transparent about it.”

Enhance your social impact reporting with Fair Tax Mark accreditation

The Fair Tax Mark satisfies the key reporting recommendations of GRI 207, the Principles for Responsible Investment (PRI) and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. Importantly, it adds the weight of independent third-party verification undertaken by a trusted social enterprise. Other businesses such as Brett Nicholls, Clean for Good, Coventry Building Society, Make, Revolver, Timetastic, Wolf & Player and Yoti view Fair Tax Mark accreditation as a valuable augmentation of their B Corp certification, given the latter does not systematically rate tax conduct.

Stay informed about tax and business purpose

Whether you’re a finance or sustainability professional or simply interested in how tax can help to drive purpose in business, our Fair Tax newsletter keeps you updated on the latest news from the growing movement of Fair Tax Mark-accredited businesses.

If you’re interested in becoming Fair Tax Mark accredited, don’t hesitate to enquire further. Your commitment to fair taxation can contribute significantly to achieving sustainability and social impact goals.