In a world increasingly focused on sustainability, ESG (Environmental, Social, and Governance) factors have become a fundamental pillar for companies seeking not only to comply with regulations but also to strengthen their reputation and commitment to society. This new paradigm is profoundly transforming how multinational corporations design their transfer pricing policies, as it is now essential to demonstrate how ESG initiatives contribute to value creation in each jurisdiction where they operate.
The Corporate Sustainability Reporting Directive (CSRD), in force in the European Union since 2024, marks a turning point by requiring companies to disclose a high level of transparency regarding their sustainable actions, including tax-related aspects. This places transfer pricing at the center of the conversation around sustainability and corporate responsibility, creating the need to integrate both dimensions into a coherent and aligned strategy.
In this context, several key trends are shaping the future of the relationship between ESG and transfer pricing:
Commitment to ESG goals is prompting many companies to reorganize their operations: centralizing sustainability functions, switching suppliers based on environmental criteria, or reformulating supply chains to reduce their carbon footprint. While these restructurings are crucial for achieving sustainability targets, they carry tax implications that must be carefully analyzed to ensure that the allocation of profits and risks complies with the arm’s length principle.
The drive toward sustainability is generating new intangibles, such as clean technologies or brands associated with responsible practices. Accurately valuing these assets is key to reflecting their real contribution to the multinational group's outcomes and avoiding tax adjustments by authorities.
Initiatives like implementing energy-efficient systems or social responsibility programs often involve significant costs that benefit multiple group entities. Defining a clear policy for cost allocation, based on sound economic criteria, is essential to meet transfer pricing requirements and mitigate double taxation risks.
Access to instruments like green bonds or preferential loans introduces new variables: how should the benefits from these financial advantages be shared among the group’s subsidiaries? The answer must reflect the real value contributed by each entity while maintaining consistency with the overall transfer pricing policy.
At ALS Transfer Pricing, we are committed to integrating sustainability into our clients’ tax strategies. Our services include:
The convergence of ESG and transfer pricing represents a major opportunity to reinforce sustainability commitments and build a solid reputation with tax authorities, investors, and society at large.
At ALS, we go a step further by incorporating artificial intelligence to deliver more accurate and efficient analyses of ESG costs and their impact on transfer pricing policies. Our AI-driven solutions automate the identification of such costs, detect inconsistencies between internal policies and ESG reports, and generate tax documentation that is consistent and aligned with the latest regulatory requirements.
In doing so, we help our clients anticipate risks and provide data-driven proof of their commitment to sustainability and transparency.
Contact us today to discover how we can support you on the path to more responsible and transparent taxation.
