From Finance to Sustainability: Tax Emerges as a Material Topic in CSRD

A new analysis of 250 Corporate Sustainability Reporting Directive (CSRD) statements has revealed how companies are beginning to view tax as part of their sustainability agenda. The findings suggest that while tax is not yet a mainstream sustainability topic, it is slowly gaining recognition as a material issue for both investors and society.

Is tax a material topic?

Under the CSRD, companies must report on material sustainability-related impacts, risks and opportunities (IROs) across their value chains. This involves a “double materiality assessment,” which considers both financial effects on the business and broader impacts on people and the environment.

Although tax is not covered by a specific European Sustainability Reporting Standard (ESRS), companies are still required to disclose it if they consider it material. In the early review, 6% of companies did just that, suggesting a growing acknowledgment that tax contributes to corporate sustainability.

Read More: CSRD Reports: Finance Sector Outshines Others in Sustainability Impact

Why does tax matter?

For many firms, tax is still seen only as a line in financial statements. But others, particularly in the financial services sector, are linking tax to governance, transparency, and social responsibility. Several Spanish companies, for example, identified tax as material, influenced by national tax disclosure laws such as Law 11/2018.

The review showed that most companies identifying tax as material did so from an impact materiality perspective, highlighting tax’s role in wealth distribution, supporting public finances, and advancing national development. From a financial materiality perspective, companies pointed to risks such as fines, regulatory changes, or reputational damage.

What do investors expect?

Investor expectations are pushing companies to reconsider their tax disclosures. PwC’s 2024 Global Investor Survey found that nearly one in five investors view tax transparency and responsibility as important when evaluating companies. However, the survey also revealed a clear gap: 45% of investors say they lack enough quantitative tax information, while 43% say they lack sufficient qualitative data.

This indicates that companies have an opportunity to use CSRD disclosures to build trust with investors by being more open about their tax practices.

How are companies reporting?

Most companies that disclosed tax information did so through entity-specific disclosures, often under governance standards such as ESRS G1 – Business Conduct. They included both qualitative and quantitative information, such as:

• Approaches to tax risk management and engagement with authorities
• Targets for compliance and transparency
• Group-wide tax directives to improve reporting
• Country-level or total tax contribution data

However, few companies referenced international frameworks like GRI 207, which sets out standards for tax governance, control, and reporting.

Also Read: The Rise of Mandatory ESG Reporting Under CSRD: What Organizations Need to Know

What’s missing?

One area where disclosures remain limited is environmental taxes, such as carbon pricing or the EU’s Carbon Border Adjustment Mechanism (CBAM). Only one company in the review identified carbon tax as a transition risk. As climate-related taxation grows, experts believe this will become a more significant element of CSRD reports.

Bridging the gap

The findings highlight a disconnect between tax and sustainability teams within many organizations. To address this, experts recommend closer collaboration, better alignment with investor expectations, and proactive preparation for future disclosure requirements such as the EU’s Public Country-by-Country Reporting regime.

For now, tax may not be a top priority in CSRD statements, but the trend is shifting. As scrutiny increases and investors demand more transparency, tax is on its way to becoming a more established sustainability topic.

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Source: PwC