ESG Criteria and Taxation: A Comparative Survey

Dear Colleagues,

The increasing prominence of environmental, social, and governance (ESG) criteria in shaping business practices and investment decisions has ushered in a transformative era in the corporate landscape. This shift is occurring in parallel with the enduring significance of taxation as a cornerstone of economic policy after the OECD-sponsored BEPS project and the implementation of Pillar II, wielding considerable influence over behavior and resource allocation within states and at the international level.

The intersection of ESG considerations and taxation is a nascent yet rapidly expanding field with profound implications for businesses, governments, and the making of the society we live in. Twenty years ago, in 2004, the acronym ESG was used for the first time (in a UN-sponsored report, “Who Cares Wins”, published with the support of the Swiss Federal Department of Foreign Affairs).

On that occasion, no reference was made to tax, but it very soon became evident that a proper tax policy would have been a key factor in the success (or failure) of the ESG revolution.

Taxation, with its inherent power to incentivize or disincentivize specific behaviors, plays a pivotal role in shaping corporate ESG performance. Tax policies can be instrumental in encouraging sustainable practices, promoting social responsibility, and ensuring good governance. Conversely, the absence of supportive tax frameworks or the presence of perverse incentives can hinder progress towards ESG goals. Understanding the intricate relationship between tax policies and ESG outcomes is crucial for policymakers, businesses, and investors alike.

This Special Issue of Laws seeks to explore for the fist time the multifaceted relationship between ESG criteria and taxation, possibly filling in the gap that was created in 2004. We invite original research articles, case studies, and theoretical analyses that delve into the following key areas:

The impact of tax policies on ESG outcomes: how do tax incentives, disincentives, and regulations influence corporate ESG performance?

The role of ESG considerations in tax policy design: how can tax systems be used and adjusted to promote sustainable practices and social responsibility?

The emergence of ESG-linked taxes and incentives: What are the legal, economic, and ethical implications of taxes and incentives tied to ESG metrics? Governments are increasingly using tax incentives to encourage businesses to adopt sustainable practices. This could include tax credits for renewable energy investments, deductions for energy-efficient buildings, or reduced tax rates for companies with strong ESG performances: is this coherent with national rules and principles, including constitutional ones?

The challenges and opportunities of ESG reporting and disclosure in the tax context: How can transparency and accountability be enhanced in this domain? Stakeholders, including investors, consumers, and civil society organizations, are paying closer attention to how companies manage their tax affairs in relation to their ESG commitments. This heightened scrutiny could lead to reputational risks for companies that are perceived to be engaging in aggressive tax avoidance or be using tax strategies that contradict their stated ESG goals.

The international dimensions of ESG and taxation: How do cross-border tax agreements, conventions, treaties, and global initiatives affect ESG goals? The global nature of ESG issues is leading to increased international cooperation on tax matters, such as efforts to combat tax havens, establish a global minimum tax, and promote tax transparency. Are ESG criteria capable of having an impact on the Pillar II implementation by the OECD and the EU?

The role of stakeholders in shaping the ESG-tax nexus: how do investors, consumers, employees, and civil society organizations influence the interaction between ESG and taxation?

Prof. Dr. Marco Greggi
Guest Editor

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• ESG
• taxation
• tax policy
• sustainability
• OECD
• international tax