ESG, Taxation and Corporate Responsibility

ESG vai além de uma tendência: é estratégia, responsabilidade e inteligência fiscal. Sustentabilidade exige técnica, não ideologia.

The term ESG - Environmental, Social and Governance - has been gaining more and more prominence in the corporate environment. Much more than a market trend, it has come to guide strategic decisions by exposing non-financial (and sometimes financial) risks, promoting the longevity of companies and managing the socio-environmental impacts of economic activities; with a focus on generating long-term value.

It's about taking care of environmental impacts - such as emissions, use of resources, climate management -; social issues - such as working conditions, productive diversity, respect for human rights in production chains -; and governance - integrity, ethics and transparency. In short: a strategic and financial intelligence protocol, which must also be observed by civil society organizations, associations, foundations and public institutions, whose actions increasingly have measurable impacts and relevant social visibility.

Created from objective stimuli, the expansion of knowledge, the growing demand for transparency and the increasingly present concrete impacts - both internal and external - in addition to the consequent regulatory requirements, ESG has become, in the last two decades, a common language (and a real need) among companies, investors and international organizations concerned about the resilience of business in a world in climate crisis, unequal and unstable.

It was on this basis that large companies and institutions began to adopt ESG criteria as a differentiator for access to capital and reputational protection.

However, in some circles, ESG is no longer treated with this vision, and has come to be confused as a synonym for a diffuse ideological project, sometimes confused with other social agendas that can cause certain disagreements or resistance.

In the United States, for example, so-called "anti-ESG" state laws have been adopted to curb business practices in line with this logic, on the grounds of ideological interference and market imbalance. The result is an unstable regulatory environment in which companies avoid sustainable measures so as not to conflict with local public policies.

This clash suggests a scenario of polarization: on the one hand, ESG advocates who ignore the economic logic and efficiency of the current form of production; and on the other, critics who ignore the increasingly obvious signs that sustainability is no longer an option but a practical requirement for business continuity. It doesn't have to be this way.

ESG practices should be considered a competitive advantage and reputational protection. The criticism here is not to be submerged in this polarization, but to see ESG as a strategic resource and an aid to progress, analyzed with a prudent, technical, attentive and careful eye - both at the macro and micro levels.

In this scenario, it is essential to put taxation at the center of the debate. Tax policy has historically been a huge instrument for inducing behavior and reallocating resources - and therefore a strategic element in providing economic and legal support for ESG.

If ESG is a tool for mitigating risks and building sustainable value, it must dialogue with the economic and fiscal mechanisms that shape institutional behavior.

And this dialogue needs to be technical, transparent and coherent - in companies, yes, but also in social organizations, trade associations, cooperatives, third sector entities and other institutions with a relevant environmental or social impact.

We can see numerous examples of ESG implementation through taxation around the world, which is in line with this logic, such as: (I) the European Union's “Green Taxonomy”, a system that defines technical criteria for classifying economic activities as sustainable, with direct impacts on financing, the issuance of green bonds and eligibility for tax incentives; (II) Carbon Border Adjustment Mechanism, a mechanism that taxes products imported from countries with more lax environmental legislation, seeking to prevent so-called “carbon leakage” and level the global playing field; (III) Tax credits for clean innovation, applied especially to low-carbon technologies, renewable energies, circular economy and energy efficiency; and (IV) Phasing out fossil fuel subsidies, as agreed in various international forums, such as the G20 and the OECD.

In Brazil, this debate is gaining even more momentum with the recent Tax Reform, which established the principle of environmental protection as one of the pillars of the new tax system. Article 6 of Constitutional Amendment 132/2023 expressly states that the system must promote sustainable development, creating fertile ground for tax policies in line with the ESG agenda.

This opens the way, for example, for

• Tax incentives conditional on the traceability of positive impact, requiring practical proof of the environmental or social benefits promoted.

• Fairer carbon pricing, based on technical data and compensation mechanisms.

• Stricter taxation of polluting activities, reinforcing the polluter pays principle.

Increasingly, investors, regulators and consumers expect companies, organizations and institutions that declare themselves to be sustainable to also be fiscally responsible, in line with the constitutional mandate to protect the environment (art. 225 of CF/88) and the international commitments signed by Brazil.

ESG is not about preventing progress, it's about protecting value in an unstable world. It's about anticipating socio-environmental risks that can affect production chains, reputations, operations and preventing litigation.

This doesn't mean giving up on social agendas or going backwards, but treating them with seriousness, technique, attention and the necessary legal certainty. It means separating strategy from ideology. And it means, above all, not surrendering one of the most promising tools for rethinking capitalism into the hands of cultural polarization.

ESG, when used well, is not a slogan. It is rationality applied to a system in disequilibrium.

And criticism of its political or moral appropriation should not be confused with rejection of social progress. On the contrary: it's an effort to ensure that the agenda doesn't get lost in the ideological noise - and that we can actually transform the world with evidence, technique, legal certainty and fiscal responsibility.