EY: 36% of businesses are at ‘advanced stage’ of ESG journey

EY shares how businesses are progressing with their ESG journeys while stating 43% of CFOs expect new taxation requirements to impact tax function

Accounting firm Ernest Youngs (EY) anticipates that UK finance leaders will see a significant increase in workloads due to the new reporting requirements from green taxes, according to the EY Tax and Finance Operations Survey (TFO).

Polling 1,600 heads of tax, financial professionals and CFO across 32 jurisdictions, the firm found that 43% of UK finance leaders expect new or emerging sustainability taxation requirements to have a significant impact on their organisation’s tax function. 

The Plastic Packaging Tax is the UK’s most recent measure introduced, in a bid to support the national net zero transition.

“UK finance teams are under increasing pressure to prepare for the green taxation and regulation being introduced by governments around the world to support national Net Zero transitions,” Mark Feldman, EY UK&I Partner and Sustainability Tax Leader. “While it’s unsurprising that most organisations have not yet entered the advanced stage of their sustainability journey, it does highlight that, for finance teams, the most rigorous work is still to come.”

The EU Carbon Border Adjustment Mechanism (CBAM) – an incoming reporting phase – is expected to have a particularly substantial influence. In fact, 72% of financial leaders in the UK have expressed that their organisation's tax and finance operations will be significantly affected by the CBAM's requirements. Coming into effect October 1st 2023, the system imposes levies on carbon-intensive imports in the EU. Initially a documentation obligation, importers must submit for the first period by January 31 2024.

Businesses' journeys towards sustainability reporting

With just 36% of UK finance leaders stating their organisation is in an advantaged stage of its ESG journey, it’s clear to see that for many, the most rigorous phase of sustainability reporting is still yet to come. This is likely to involve an increase in public reporting against ESG goals, driving business innovation and enhancing supply chain sustainability.

Additionally, 49% of respondents state that their organisation is in the middle stage of its ESG journey, prioritising public ESG goals and achieving strategic sustainability gains. 

Finally, 15% of organisations are still in the early stages of their ESG journey, still establishing roles and identifying quick wins.

“UK businesses should be laying the foundations now to ensure their finance and tax functions are prepared to play an active role in sustainability reporting,” Feldman says. “Capturing and analysing data will be crucial for disclosing progress against environmental goals and organisations will need to ensure their data infrastructure capabilities are up to the challenge.” 

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