Sustainability demands a tax overhaul

IIn an opinion piece published last week in the Dutch daily NRC, author and former Unilever CEO Paul Polman and Eosta CEO Volkert Engelsman called for a review of the financial and tax system to to develop a green economy with sustainable agriculture at its heart.

“Businesses now have a social responsibility that goes beyond achieving profits for shareholders,” they wrote. “Once we see how the economy is deteriorating, we can no longer ‘ignore’ it. The need to work more sustainably has become existential.

They cited the example of a Dutch court ordering Shell to cut emissions, as well as the Netherlands ending its investments in fossil fuels, as signs that change was coming.

“True cost accounting, which puts a price on a company’s environmental impact, is gaining ground throughout the financial industry,” the article said. “And even the agricultural sector realizes that securing the survival of mankind and the planet is more important than maximizing production.”

The authors said all kinds of legislation was in the works in Europe to require companies to report on sustainability. “The European directive on corporate sustainability reporting was adopted last year with the new EU taxonomy, a system for classifying economic activities that the EU considers sustainable or climate friendly,” said they wrote. “The EU taxonomy is intended to be a guideline for investment funds, but can also be used to determine where investments and agricultural subsidies are used.”

However, they advised caution. “It is telling that only 10 percent of the new EU agricultural budget is earmarked for small and medium-sized enterprises, while 90 percent will continue to go to the agrochemical giants,” they said. “You can’t force companies to really become more sustainable by imposing reporting obligations. We risk heading towards an endless bureaucracy of sustainability, in which only the biggest companies are able to find their way into the billions of Europe. Real change is not imposed, but comes from within. “

Nevertheless, he continues, fiscal measures would be essential to steer the sustainable transition in the right direction. “Calls for a reduction in VAT on fruit and vegetables are increasing in Europe and this has already been partially implemented in Germany”, we can read. “And support for a tax on meat, a tax on sugar or a universal tax on CO2 is expressed regularly.”

The authors identified three areas where economies needed to be “fundamentally overhauled”: ecological collapse, the wealth gap and the health crisis.

“This will require a review of the tax system at all levels, moving from value added tax to tax on the use of natural resources,” the article said. “It strengthens sustainability and boosts employment.”

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