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As organisations sharpen their focus on ESG outcomes, tax considerations and the governance structures that support them have become critical markers of responsible management and long term value creation.
For mid‑sized businesses, this alignment has always been considered, even if not formally articulated. Many businesses already demonstrate strong tax governance, disciplined decision-making and transparent financial practices. However, in practice, this governance frequently remains undocumented.
In many cases, these businesses are further along the sustainability journey than they realise. The governance frameworks they have relied on for years to manage tax, financial oversight and risk are the same foundations that support broader ESG maturity. Importantly, effective tax governance should be tailored to the size of the organisation and the complexity of its operations, focusing on clarity, accountability and consistency rather than volume.
Embedding tax governance into the sustainability conversation creates a more complete and coherent decision‑making framework. It ensures that financial, growth, tax, environmental and social considerations are not treated as separate priorities but as interconnected levers for building resilient, well‑run organisations. This alignment strengthens business performance, supports transparent stakeholder engagement and enables leaders to make decisions with clarity and confidence.
Tax is one of the most tangible ways a business contributes to economic and social development. It funds essential public services, supports national infrastructure and enables long‑term community outcomes. For organisations with maturing ESG plans, aligning tax with sustainability is no longer optional; it is a marker of good governance and long‑term value creation.
Forward‑thinking organisations are reframing their tax strategies through an ESG lens. This means shifting from a purely compliance‑driven focus to one that prioritises responsible, transparent and stakeholder‑aligned tax practices.
The following five pillars outline the core elements required to align sustainability and tax principles. These are also the areas where we work closely with clients to assess their current position and develop a more sustainable, responsible approach to tax.
Strong governance sits at the heart of a sustainable tax strategy. This includes clear board or committee oversight, well-defined tax policies and evidence that tax decisions reflect the organisation’s values. Effective governance embeds tax into enterprise risk management and ensures appropriate controls, accountability mechanisms and reporting structures. This is a key focus area for the ATO during assurance reviews, particularly when errors are found. Well-documented and effective governance significantly minimize the likelihood of errors occurring.
Responsible tax planning balances commercial outcomes with ethical and regulatory expectations. This pillar considers how an organisation identifies, manages and documents tax risk, and whether its planning reflects both compliance requirements and broader corporate values. This is an area the ATO would typically focus on when reviewing private group matters.
A sustainable approach would involve seeking advice and proactive engagement with the ATO through the early engagement/commercial deals programs for complex and commercial matters, which prioritise certainty, defensibility and long-term stability. Effective tax governance can provide confidence that the business is paying the right amount of tax.
For global organisations, paying a fair share of tax in the countries in which they operate is essential and cross-border compliance is therefore a critical element of tax sustainability. This pillar examines how a business manages complex international obligations, including transfer pricing, base erosion rules and evolving global standards such as the OECD’s Pillar Two. Sustainable practice promotes consistent tax positions, timely compliance and proactive management of regulatory change.
Sustainable tax practice requires effective engagement with regulators, investors, employees, civil society and the communities in which the organisation operates. Engagement may include publishing tax principles, contributing to industry forums or proactively communicating how tax supports corporate purpose. These build trust and reinforce accountability.
Transparency is the most visible pillar. It includes clear public disclosures of tax strategy, narrative explanations of tax outcomes and, for some organisations, country-level reporting. Transparent reporting demystifies tax, reduces reputational risk and strengthens stakeholder confidence.
Embedding tax within ESG delivers benefits that extend far beyond compliance. It enhances brand integrity, strengthens stakeholder confidence and supports an organisation’s long‑term social licence to operate. Sustainable tax practices provide management with greater certainty and clarity, empowering them to focus time and energy on growing the business rather than managing uncertainty or risk. They also build confidence with potential buyers in a sale process and support the attraction and retention of investors by demonstrating disciplined governance, transparency and alignment between an organisation’s values and its actions.
Businesses with sustainable tax practices are better positioned to anticipate regulatory change, manage reputational and financial risk and demonstrate alignment between their values and their actions.
At Grant Thornton, we specialise in supporting private mid-sized businesses as they navigate rising expectations around tax transparency, governance and sustainability. We take a holistic and practical approach, helping clients embed tax governance into their broader commercial strategy in a way that is proportionate, value‑driven and aligned to how they operate.
By integrating tax with governance, risk management and sustainability considerations, we help businesses strengthen decision‑making, manage risk with confidence and build a credible, sustainable framework that supports long‑term growth and stakeholder trust.
