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Introducing our new client engagement program: ESG and Tax – Setting the Scene

In brief

As rapid transformation and changing legislation carve the future business landscape, tax considerations increasingly intersect with your most strategic business decisions. At Baker & McKenzie, we look at tax from every angle. Against this backdrop, we are eager to share our highly anticipated program “Unlocking the intersection between ESG and Tax” with you, which we were proud to launch today at our 18th Annual Global Tax Planning & Transactional Workshop “Embracing the Changing World of Tax”.  

As part of our program, we intend to share a series of knowledge bites to provide brief yet meaningful insights on the intersection between ESG and Tax.  You can find our first instalment, “ESG & Tax: Setting the scene'” below.


  1. Key takeaways
  2. In more detail
    1. ESG & Tax: Setting the scene
    2. The intersection between ESG & Tax
      1. Tax and the “E”
      2. Tax and the “S”
      3. Tax and the “G”

Key takeaways

Our experience tells us that tax is poised to become a crucial aspect of ESG. The prevailing socio-economic, legislative, and commercial market landscape means that tax transparency and sustainable tax practices are of increasing focus. Businesses have the opportunity to harness tax as a means of long-term value creation.

Tax intersects with ESG through its potential environmental impact, social responsibility implications, governance and transparency requirements, and its role in stakeholder engagement. Businesses are being called to consider these intersections and ensure that their tax practices align with ESG principles to achieve their purpose and meet the expectations of investors, regulators, employees and the public.

By understanding the significance of tax within their ESG strategies, and proactively addressing tax-related considerations, businesses can meet stakeholder expectations and capitalize on opportunities for positive impact, whilst demonstrating their commitment to sustainable practices as part of their ESG journey.

In more detail

We recognize that businesses are at different stages of their ESG journey and the constantly evolving ESG landscape is challenging to navigate. With that in mind, the purpose of our engagement program is to share our learnings in the ESG & Tax space with you and to actively listen to the challenges you face with the intention of supporting and guiding our clients on their paths. We work closely with our colleagues who routinely advise other business functions on ESG matters, including our corporate governance colleagues, as we know that a successful and robust ESG agenda requires meaningful engagement and collaboration across all functions of the business.

We invite you to join us on this journey of discovery and connection to uncover, and ultimately solve, the challenges and seize the opportunities that lie ahead with a view to continuing to create sustainable and resilient business practices going forward.

ESG & Tax: Setting the scene

We are observing businesses experience a shift in trust parameters. This shift is paired with increasing pressure from investors, regulators, employees, and the public to evolve their purpose so that it extends beyond a pure profit-seeking motive and drives positive change in the social and environmental space. Against this backdrop, Environmental Social Governance (ESG) strategy, compliance and disclosure have emerged as a powerful tool for businesses to respond to these pressures, enabling them to articulate and enact business purpose with a view to long-term value creation for all stakeholders and re-define the link between intrinsic and extrinsic values.

While ESG encompasses environmental, social and governance aspects, it goes beyond a mere checklist of isolated issues — it is an ongoing, multifaceted process that demands businesses to adapt. In this dynamic environment, having previously been viewed as being behind the curve, in our experience tax is becoming a prominent consideration in the ESG agenda as it consistently garners attention from stakeholders.

Tax is now an ESG hot topic for several reasons:

  1. There is a paradigm shift towards enhanced tax transparency. This is driven by legislative changes such as the EU Public Country-by-Country (CbC) Reporting Directive and the Australian Public CbC law proposed on 6 April 2023 (which goes beyond the EU requirements), as well as voluntary disclosures such as:
    • the GRI207, which is in general voluntary but imposed on members of certain international organizations (such as the International Council on Mining and Metals)
    • B-Team Principles
    • the UN-PRI Principles, which require disclosure of certain tax and financial data as well as information relating to tax governance and strategy.
  2. Tax is increasingly recognized and used as a powerful policy tool and funding mechanism, playing a crucial role in challenging geo-political environments as well as environmental challenges.
  3. Tax is a non-voluntary quantifiable metric applicable to all businesses, making for easy comparisons and scrutiny by stakeholders.
  4. Critically, tax touches on all aspects of business, extending from board room strategy discussions to public relations and supply chains. 

This means that in the context of a robust ESG strategy, tax can have far-reaching implications that go beyond day-to-day compliance and risk unprecedented legal, commercial and reputational challenges for businesses. We are seeing that the intensification of the debate, the involvement of high-profile decision-makers in public and private sectors and the observed impact on capital and talent allocation is resulting in tax no longer being viewed as a peripheral issue in ESG but an integral part of the sustainability journey.

The intersection between ESG & Tax 

Our experience is that tax matters touch on all aspects of a robust ESG agenda. We are helping our clients to frame their responses to ESG and Tax matters by grouping their focus in two key areas:

  • tax specific measures that form part of the ESG agenda
  • broader ESG measures (e.g., those necessitating business transformation, such as supply chain restructurings) with consequential tax implications.

In this first article of our series, we will focus on the first area by sharing some of the specific tax measures that fall under the ESG umbrella.

Tax and the “E”

The environmental (E) aspects of the ESG agenda have the most tangible overlap with tax matters, including taxes and other policy tools that are employed to incentivize or disincentivize behaviors that impact our environment and the carbon footprint of businesses. Whilst these newly introduced environmental taxes might currently represent a small fraction of revenue and often target specific industries, they are expected to become more comprehensive as the climate emergency demands that robust measures are employed to address environmental damage. 

These types of environmental taxes and incentives tend to be jurisdiction specific, e.g., the UK Plastic Packaging Tax (which includes joint and several liability provisions) and the contribution on single use packaging made of plastic or aluminum in Portugal, meaning that businesses must get to grips with their new wide-ranging domestic tax obligations quickly. By contrast, the recently published EU Carbon Adjustment Mechanism is an example of a broader measure impacting a wide range of sectors and products, aiming to drive positive global climate action while adding significant fiscal revenue to Member States’ resources. 

We are therefore seeing an increased focus on businesses getting to grips with new environmental taxes and incentives from a compliance perspective. In addition, as businesses seek to understand the tax cost and environmental impact of their supply chains, engagement from a corporate tax, transfer pricing and indirect tax perspective paired with a holistic review of the business long-term goals on sustainability is critical.

Tax and the “S”

The social (S) aspect of ESG, on the other hand, is far more subjective. At the heart of this issue is the social impact of businesses’ tax affairs, and this assessment will vary significantly depending on the nature of the business. With stakeholders increasingly scrutinizing the tax affairs of businesses, especially within the investor community, we are seeing businesses increasingly focus on what it means to be a responsible taxpayer (from governance to disclosure and transparency about their tax affairs). This exercise requires meaningful engagement within the business across all relevant functions and in our experience the most impactful responses to the question of responsibility and accountability when it comes to tax matters are grounded in the relevant business’ overarching purpose.

Tax and the “G”

Tax governance underpins the governance (G) aspect of the ESG agenda and is an integral element of best practice corporate governance. Our experience tells us that many businesses are increasingly focused on governance, transparency and disclosure, as public CbC reporting dawns and disclosure of tax matters against voluntary frameworks (B-Corp, GRI207) are increasingly being made. In an era of heightened focus on global tax transparency, we are observing that effective governance and sustainable decision-making regarding tax are of paramount importance.

Please contact Natalie Dunne and Gabrielle Galdino-Glaeser if you are interested to hear more about our experience in this space. 


Natalie is a Partner at the London office of Baker McKenzie under the Corporate Tax department since qualifying as a solicitor. Natalie was seconded to Baker McKenzie's Tax Practice Group in Hong Kong for three months in 2010.


Gabrielle is a Senior Associate in the London office with over 15 years of experience (in the UK, EU and Brazil) supporting global businesses and non-profit organisations with legal, strategy, disputes, risk management and governance advice, in particular for tax and ESG matters.

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