The influence of tax policies on corporate sustainable practices in the European Economic Area: a systematic literature review

De Boe, Grégory;Swaen, Valérie;Lamensch, Marie
(2022) Conférence sur la recherche interdisciplinaire et transdisciplinaire “Transition et Développement Durable” — Location: Louvain-la-Neuve, Belgium (24.November.2022)

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Abstract
Sustainable development can be defined as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (Brundtland Report, 1987, p.41). Aware of their responsibility for subsequent generations, in 2015 world leaders endorsed 17 Sustainable Development Goals (SDGs). These goals provide a framework to achieve a more sustainable future for all, to which, among others, companies are expected to contribute through sustainable practices, balancing the three pillars of sustainable development – economic, social and environmental (Harris, 2000; Purvis, Mao & Robinson, 2019). One challenge in transitioning to a more sustainable society concerns the transformation of production modes. In particular, SDG 12 – Ensure sustainable consumption and production patterns – seeks to respond to this challenge by engaging key actors, including the public and private sectors. SDG 12.6, for example, encourages companies to adopt sustainable practices. In accordance with SDG 12.c, public institutions are committed to take measures ‘including (…) restructuring taxation and phasing out those harmful subsidies’ (UN Desa, 2016, p.27). The question arises as to what extent companies are effectively driven by the current tax policies to achieve the SDGs. By tax policies, we mean both taxation and subsidy policies. This leads to the following research question: To what extent do tax policies influence sustainable practices undertaken by companies in the European Economic Area? Against this research question, the aim of the paper is threefold. First, we identify the behaviors that the tax policies studied seek to promote (e.g. innovation, green procurement), and the sectors that have attracted the most attention. This allows for a better understanding of whether some industries are relatively under-researched. Second, we determine which sustainability pillars are covered in research. Through the context provided by these two subgoals, we draw divergences and convergences in the results related to the influence of a given tax instrument (e.g. a carbon tax) on firms’ adoption of sustainable practices. To answer these questions, we conduct a systematic literature review of 115 scientific documents extracted from the Scopus, EBSCO, IBFD, Cordis EU and Stradalex databases and from the Intertax journal, World Tax Journal and the EC Tax Review, based on the Preferred Reporting Items for Systematic Reviews and Meta-Analyses approach (Moher et al., 2009). The whole selection procedure is summarized in Figure 1. The paper contributes to identify gaps in the literature at the crossroads between sustainable development and tax policy and therefore potential avenues for research. First, literature on tax policy and sustainability can be extended by considering studies targeting tax policies related to socially controversial industries or specific industries that either emit pollutants rather than greenhouse gases or a lot of greenhouse gases on a local basis (such as pulp and paper industry, see Scordato et al., 2018). Second, literature on tax policy and sustainability can be nuanced by considering more qualitative studies to identify the specifics and research hypotheses of when the same tax instrument is effective or not in achieving sustainability.
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De Boe, G., Swaen, V., & Lamensch, M. (2022). The influence of tax policies on corporate sustainable practices in the European Economic Area: a systematic literature review. Conférence sur la recherche interdisciplinaire et transdisciplinaire “Transition et Développement Durable”, Louvain-la-Neuve, Belgium. https://hdl.handle.net/2078.5/246744