DACH study on tax transparency and sustainability reporting
Public awareness of the importance of tax as a contribution to society increases especially in times of crisis. The trend towards greater transparency also means that tax has become an established part of sustainability reporting.
With the adoption of the “GRI 207: Tax 2019” standard in December 2019, the Global Reporting Initiative (GRI) defined for the first time which information should be included in tax transparency reports as part of sustainability reporting.
PwC Austria, in cooperation with PwC Germany and PwC Switzerland, has followed up on this by examining the tax transparency and sustainability reporting of the 108 leading companies listed in the Austrian Traded Index (ATX), German Share Index (DAX), and Swiss Market Index Expanded Index (SMIEXP). A key criterion is the consideration of the requirements from four key frameworks – the GRI 207: Tax 2019 standard, the tax strategy criterion of S&P Global Corporate Sustainability Assessments, the OECD Guidelines for Multinational Enterprises, and the “Measuring Stakeholder Capitalism” report of the World Economic Forum.
GRI 207 sets the agenda in Germany and Austria
One of the core findings of the study is that the majority of listed companies in the DACH region will publish initial information as part of their tax transparency and sustainability reporting in 2022. The results also show that of the four frameworks in use, the GRI 207: Tax 2019 standard has the greatest relevance for both the Austrian and German markets.
Swiss companies, on the other hand, are increasingly relying on the tax strategy criterion of S&P Global Corporate Sustainability Assessment. This is used in particular to select the components of the Dow Jones Sustainability Indices and, in contrast to GRI 207, is more strongly oriented towards investor expectations.
Austrian companies still lag behind in sustainability reporting
While German companies have introduced more comprehensive reporting based on GRI 207, the situation in Austria is somewhat different. Here, only a few companies publish tax information in connection with the sustainability report. In this context, expanding the scope of reporting may be useful. Certain sustainability-related ratings and indices use tax information as a review criterion, for example through S&P CSA. If companies do well in these categories, they can expect competitive advantages on the capital market.
Individual sectors as pioneers
In addition to the regional differences, certain trends also emerge when looking at the different sectors. For example, banks and financial service providers as well as commodity companies are among the pioneers in tax transparency and sustainability reporting. The study shows that many leading companies already tend to report more extensively due to their legal obligations (Accounting Directive or the Taxonomy Regulation).
Other sectors, including the energy or real estate sectors and energy-intensive industry, for example, are in turn dependent on good ratings and consequently also on extended reporting due to special competitive conditions.
The need to catch up with quantitative key figures
Although the focus of the individual frameworks differs greatly in places, a commonality has emerged across all standards. Requirements that stipulate a qualitative description tended to be reported much more frequently. Quantitative key figures are reported less frequently by many companies due to the data required, the higher effort required to collect the data, and certain competitive risks. It is precisely due to their business and trade secrecy that many companies are cautious about publishing quantitative data relating to Country-by-Country Reporting (CbCR) or Total Tax Contribution. However, in the European Single Market, the publication of public CbCR for reports will become mandatory from 22 June 2024. As a result, more and more companies are strategically deciding to report in advance on a voluntary basis and thereby improve their ratings compared to competitors.
The link to the full study can be found here. Information about other intersections between ESG and taxation can be found on our website.
