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PwC study reveals global impact of carbon taxes on supply chains
Industry News- Jan 17,24
The study emphasises that measures like the EU's Carbon Border Adjustment Mechanism (CBAM) will necessitate companies to proactively evaluate their implications across different regions.
Carbon taxes are anticipated to impact supply chains in various jurisdictions, as reported by 67% of respondents in PwC's tax transparency in ESG study. The study emphasises that measures like the EU's Carbon Border Adjustment Mechanism (CBAM) will necessitate companies to proactively evaluate their implications across different regions. This involves assessing potential cost increases, compliance requirements, and shifts in consumer behaviour.
CBAM's objective is to establish a fair price for carbon emitted during the production of energy-intensive products entering the EU, such as iron, steel, cement, fertilisers, and aluminum. Scheduled to be implemented from January 1, 2026, the trial period, starting on October 1, 2023, requires companies from seven carbon-intensive sectors to share emissions data with the EU.
Half of the surveyed companies have committed to net-zero goals and are actively working to reduce their carbon footprint and align with environmental sustainability goals (ESG). Among them, 48% aim to achieve net-zero emissions by 2030.
To navigate changing carbon tax regimes, the PwC survey suggests that businesses consider implementing digital solutions for strategic assessment of carbon emissions and managing related tax incentives. Taking a proactive stance can help businesses reduce risks and capitalize on opportunities.
Despite these efforts, 59% of participants believe that policymakers should incentivise ESG practices, with 34% suggesting a combination of environmental taxes and incentives to promote sustainable practices.
The PwC report highlights the importance of such policies, stating that they can encourage companies to prioritise ESG investments, promote responsible tax conduct, contribute to climate change mitigation and adaptation, and support sustainable economic development.
The study also underscores the significance of net-zero or decarbonisation commitments, referring to companies' pledges to reduce greenhouse gas emissions and offset remaining emissions through nature-based solutions or carbon capture and storage.
In the Indian context, the survey notes that there is room for improvement in tax transparency practices, with 75% of respondents indicating they lack a publishable tax transparency report. The study reveals a growing interest among stakeholders, particularly shareholders and regulators, in tax transparency practices as an essential aspect of responsible corporate behaviour. Over 70% of participants believe that shareholders and regulators are keenly interested in a company's tax transparency practices.
Looking ahead, the survey indicates that 48% of businesses in India plan to voluntarily enhance tax transparency in the next three years by disclosing their total tax contribution. The insights are derived from responses from 250 senior executives across various industries in India.
Source: Business Standard
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