Supply chain sustainability

Add value to your transformation.

Supply chain sustainability

Add value to your transformation.

What’s the issue?

Supply chains are evolving in response to decarbonisation pressures and a broader need to enhance resilience. New regulations, such as the EU’s Carbon Border Adjustment Mechanism (CBAM) are also forcing a re-evaluation of existing supply chains.

At the same time, business models are evolving. The need to reduce waste means that product lifecycles are becoming more circular.

Goods are being developed for reuse or repurposing, rather than disposal, upending traditional supply chain models. Tax is key to supply chain transformation – after all, changes to the business mean changes to the tax profile. You will want to re-evaluate the key areas, such as:

where value now sits in the business, and what this means for transfer pricing models

the impact of new supply chains on VAT and customs taxes, including opportunities to optimise the tax position
The governance model and RACI frameworks in relation to new taxes and regulations, such as plastic packaging, new environmental taxes and the EU CBAM Global compliance and reporting obligations,
whether any sustainability innovations or new IP could qualify for tax reliefs

70% of tax leaders are expecting significant changes to improve the sustainability in their organisation’s supply chain in the next 2 years. A further 21% are already reviewing these changes for their organisation*

_{^{*Source: KPMG survey in March 2023 – of 500 UK Tax Leaders}}

What’s on the to-do list?

Supply chain sustainability is a significant opportunity for tax functions to add value, but with only two in five tax leaders expecting to be significantly embedded in their organisation’s supply chain transformation*, it’s clear that stronger engagement with the broader business is still needed. Tax leaders should put these supply chain priorities on their to-do list for this year:

^1.^{Engage with the business}

Above all else, talk to the business.

Understand your organisation’s supply chain transformation journey, and how the tax function can contribute to it.

If you’re not aware of what the business is doing to drive a sustainable supply chain, then you can’t manage the tax risks and opportunities.

^2.^{Revisit your value chain}

Transforming the supply chain will change the organisation’s underlying value drivers.

Consider what this means for your transfer pricing and IP models. Similarly, review your indirect tax and customs profile in light of the organisation’s new business model.

A tax value chain analysis will be a crucial first step to understand the new position.

^3.^{Clarify accountability}

Be clear about ownership of the different aspects of supply chain transformation.

Who’s responsible for ensuring compliance with changing tax policy, and identifying and gathering the necessary data?

Similarly, when new taxes emerge, it’s often unclear as to where responsibility for them sits internally. Make sure you know what needs to be done, and who should be doing it. Having up-to-date tax processes and controls will be crucial.

^4.^{Seize the tax opportunities}

How can the tax function add value to the supply chain transformation journey?

For example, what tax credits, incentives and grants will your organisation’s innovations towards sustainability qualify for? How can you ensure you are paying the right tax whilst reducing the carbon and waste footprints of your supply chain?

Make sure you’re on top of these opportunities, and communicating your success stories to the business.

_{*Source: KPMG survey in March 2023 – of 500 UK Tax Leaders}