A rapidly evolving global landscape is driving increased demands and pressures on businesses to implement sustainable initiatives that turn ESG into action. This shift is also an opportunity to help fulfil their purpose, achieve goals and position themselves for future growth.

Businesses have become exposed to significant ESG legal risk due to a global imperative to change corporate behavior, which requires a deep understanding of rules and regulations across jurisdictions and an appreciation that commitments to outcomes must be accompanied by actions – not just words.

Having robust tax policies and practicing good tax governance are important steps when increasing transparency to showcase responsible tax practices. Being able to benchmark against standards and peers provides valuable insights and improves decision making. As businesses take steps to decarbonize their business and supply chains, it is imperative they consider where rapidly changing tax regulations may impact strategic decisions, as costs could increase, but significant opportunities to access tax incentives or other funding opportunities may arise.

Considerations for your leadership team:

  • Are you leveraging available tax incentives and grants to help fund your ESG initiatives?
  • How well are your ESG programs aligned with evolving local and global environment and social regulations to ensure compliance and avoid potential legal liabilities?
  • Are your decarbonization efforts considering the various tax implications of carbon pricing, carbon credit trading and/or investing in carbon projects?
  • Have you conducted thorough supply due diligence to ensure your suppliers are following your responsible sourcing and labour policies?
  • Do you understand your legal obligations regarding ESG disclosure and reporting under Canadian and international securities laws? How are you ensuring accurate and transparent reporting?

How we can help our clients:

  • Environmental tax incentives, subsidies, and grants: Supporting our clients in their decarbonization journeys by ensuring that they are compliant with, or have considered the implications of, environmental regulations, and are taking advantage of the accompanying tax incentives and government grants that are available to them. Including calculating greenhouse gas (GHG) emissions, compliance with Carbon Tax, and accessing funding through the Clean Technology Investment Tax Credit, Clean Hydrogen Investment Tax Credit, Clean Electricity Investment Tax Credit, and CCUS Investment Tax Credit, etc
  • ESG Value chain management: Supporting multinationals with ESG driven operating models which can help mitigate potential risks and exposures, optimize transfer pricing and indirect tax flows, and improve access to capital through new grants and incentives
  • Pay equity: Developing pay equity programs which align with strategic diversity, equity and inclusion (DE&I) goals and achieve legal compliance
  • Occupational Health & Safety: Addressing legal risks and due diligence requirements relating to Canadian OHS laws, and representing clients in regulatory proceedings
  • Human rights and modern slavery: Assessing and managing workplace human rights and modern slavery risks across the supply chain and in other business relationships (including compliance with Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act)
  • Work from anywhere: Designing and implementing a remote work program to foster equal opportunities, inclusiveness and diversity that benefit the organization and its workers
  • ESG tax governance, transparency and benchmarking: Compliance with Base Erosion & Profit Shifting (BEPS) pillar 2, country-by-country reporting, and proposed EIFEL requirements for interest deductibility. Development and automation of Tax reporting and transparency requirements
  • Deal advice on tax, regulatory and access to funding issues as well as due diligence on target entities
  • Managing ESG legal risk and dispute resolution

As stakeholder expectations evolve, tax matters will increasingly become part of the ESG transformation journey. Companies should seek to understand how to navigate the changing tax and legal sustainability landscape. No matter what stage you’re at, KPMG professionals can assist in strengthening your company’s tax and legal reporting and governance, to improve transparency and help keep it safe.

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