Reporting on tax as a sustainability topic by major multinational companies is a growing trend, however, comprehensive disclosure is patchy, according to research from the Global Reporting Initiative (GRI) with support from Deloitte Netherlands.
The report In-depth analysis of reporting trends using the GRI Tax Standard is based on initial research that found a quarter of the 1,000 largest companies in the world use GRI 207 – its global standard for tax transparency – in their sustainability reporting. It then analyses reporting trends among the 71 companies that referred to all four of the GRI 207 disclosures in their report: approach to tax, tax governance, stakeholder engagement, and country-by-country reporting.
A majority of these companies disclose (all or partly) their approach to tax (73%), tax governance (56%) and stakeholder engagement (54%), while only a minority (22%) include country-by-country tax reporting. Additionally, the analysis found Europe is the leading region when it comes to disclosing GRI 207 requirements (at 62%), significantly higher than the Americas (28%) or Asia-Pacific (21%).
By sector, GRI 207 disclosures are most widely applied in oil & gas (67%), consumer goods & retail (57%), and energy & utilities (52%) – while at the other end of the scale are food & beverages, food retailers, and electronics & technology (all 18%). One-in-five companies indicated they applied external assurance to their GRI 207 reporting, and 30% explicitly reference tax as a material topic.
Bastian Buck, GRI chief standards officer, said: “It is encouraging that hundreds of companies around the world use GRI 207 to report their tax-related impacts in a way that aligns with our global best practice. We acknowledge that reporting is a journey and applaud these leading companies that have taken the decision to make their tax practices more transparent. The next step is more comprehensive and detailed reporting, which fully reflects how businesses contribute in the countries and communities where they operate.
“Companies that align with the disclosures in GRI 207 will be best placed not only to respond to the needs of their stakeholders, investors included, but also to get ahead of legislative changes that are increasing requirements for tax transparency. This includes Australia’s recently launched country-by-country reporting rules, which are based on the GRI Tax Standard.”
Recommendations to improve tax reporting
The report also offered a series of recommendations to help companies improve their tax reporting, based on common gaps identified in current practices. This includes providing detailed reporting on GRI 207 requirements; combining GRI reporting with other tax initiatives, such as the B-Team Responsible Tax Principles; being clear about the level and scope of external assurance applied to GRI 207 reporting; and being aware of advances in artificial intelligence.
“The GRI 207 Tax Standard is a unique tool to transparently tell your tax story – from your tax policy, to governance, to country-by-country reporting. It is comprehensive, international, and cross-sector,” added Dave Reubzaet, director of tax and sustainability at Deloitte Netherlands.
“Although many companies worldwide already use GRI 207, this research shows that there is still a lot of potential to further develop such a tax storytelling. In this regard, I can definitely recommend taking into account the insights and recommendations of this research. This will also help to address tax reporting expectations and the risk, perceived or otherwise, of tax greenwashing.”
