The ESG Journey in Retail

ESG is no longer just a sustainability report line item. For retailers, it touches sourcing, packaging, distribution, e-commerce, and talent. Every one of those areas carries tax implications.

Why tax departments can't sit on the sidelines

As CEOs and CFOs take on greater personal accountability for ESG progress, tax leaders need a seat at the table. Failing to meet ESG goals can expose a company to new tariffs and taxes. Taking aggressive tax positions is drawing more scrutiny from regulators and investors alike. And with tax transparency mandates emerging in both Europe and the U.S., how your company manages its tax obligations is becoming part of the ESG conversation itself.

The forces shaping ESG in retail

Retailers face ESG pressure from multiple directions. Employees (especially younger workers) want to work for companies that reflect their values. Consumers are making purchasing decisions based on how retailers manage packaging, logistics, and labor conditions. Investors are using ESG metrics to evaluate creditworthiness and investment risk. Regulators, including the SEC and EPA, are moving toward mandatory ESG disclosures. And in 2019, more than 180 CEOs signed the Business Roundtable's updated corporate purpose statement, shifting the focus from shareholder return to broader stakeholder accountability.

Where tax complexity lives in retail ESG

U.S. sales tax jurisdictions have imposed ESG-related fees for years, covering plastic bags, tire disposal, electronic waste recycling, and similar items across roughly 400 jurisdictions. Tax teams that use automation to manage these obligations reduce audit risk and protect the company's reputation. Underpaying sales taxes or overclaiming refunds can both generate negative press and undermine public trust.

E-commerce adds another layer. Retailers that expanded online channels during the pandemic, including buy online pickup in store, created new tax management complexity. Those systems need to integrate properly with sales tax engines before new ESG-related taxes and fees come online.

Global companies also face growing digital compliance requirements: real-time reporting, electronic invoicing, and other mandates that require sophisticated tax technology to manage.

How to get your tax department ready

Vertex and KPMG recommend that retail tax leaders take three practical steps. First, monitor ESG regulatory developments closely and anticipate new compliance needs before they arrive. Second, assess how supply chain changes, new sales channels, and e-commerce growth are creating tax exposures. Third, invest in the right technology, processes, and skills now. Your team needs to respond quickly as ESG rules continue to evolve.

The retailers making progress on ESG are greening their supply chains, rethinking labor practices, and committing to carbon reduction. Their tax departments need to move with them.