How Does ESG Impact Transfer Pricing?

As the global economy shifts and responds to multiple pressures, businesses continue to transform accordingly. With the evolving definition of value, there has been a renewed emphasis on Environmental, Social, and Governance (ESG) policies by companies across all industries. The ESG strategies that companies pursue directly influence every aspect of their business, including their tax departments, and transfer pricing specifically. For instance, environmentally sustainable practices may shift functions and operations within the value chain. Costs related to funding social initiatives may increase in the short-term, but result in higher profits in the longer-term, begging the question, which parties within a multinational enterprise are best positioned to assume those immediate costs today, potentially reaping the rewards tomorrow? Governance is all about transparency, which has been a reoccurring theme in transfer pricing documentation requirements, as tax authorities around the world have taken a keener interest into understanding multinational enterprises’ intercompany transaction flows.

Our host Brittany Hardin Tanguay welcomes Anjit Bajwa, Transfer Pricing Principal and National Tax Leader for Chemicals Industry, and Jessie Coleman, Tax Principal with the Washington National Tax practice, to discuss ESG and what it means to transfer pricing.