Tax: The missing pillar of ESG in Zimbabwe

LINROY MUNETSI

 

This article argues that responsible tax governance should be treated as a vital component of ESG in Zimbabwe.

 

As companies seek investment, build public trust and demonstrate their contribution to national development, tax transparency offers a practical way to connect corporate governance with sustainable economic impact.

 

For years, discussions around Environmental, Social and Governance (ESG) have focused on carbon emissions, renewable energy, labour practices, and board diversity.

 

Yet an increasingly influential body of thought from investors, academics, tax specialists, and sustainability organisations argues that one of the most important measures of corporate responsibility is often overlooked: tax.

 

Globally, tax is no longer viewed merely as a compliance obligation. It is increasingly regarded as a core ESG issue because taxes fund the public infrastructure, healthcare systems, education services, and governance institutions upon which sustainable economic development depends.

 

The OECD has consistently linked tax transparency to stronger governance, while responsible-investment advocates increasingly regard tax behaviour as a proxy for corporate citizenship and ethical business conduct.

 

For Zimbabwe, the growing focus on tax within ESG presents both a challenge and an opportunity: a challenge because companies will face greater scrutiny over tax governance, and an opportunity because credible tax transparency can support investor confidence and public trust.

 

Why tax matters in ESG

 

Leading ESG and sustainability frameworks increasingly treat tax transparency as part of governance and broader value creation. The United Nations-supported Principles for Responsible Investment has highlighted tax fairness and responsible tax practices as governance considerations for investors assessing corporate conduct. Similarly, the World Economic Forum’s Stakeholder Capitalism Metrics recognise tax contribution as an important indicator of business prosperity and societal value creation.

 

The framework encourages companies to report on taxes borne and taxes collected as part of broader sustainability disclosures.

 

This reflects a simple principle: a company’s claim to create sustainable value is more credible when its tax strategy is consistent with the economic and social contribution it says it makes in the markets where it operates.

 

As renowned governance scholar Professor Robert Eccles of Oxford University has argued, corporate sustainability increasingly requires transparency regarding how businesses generate value and distribute that value among stakeholders.

 

Tax sits at the centre of that discussion.

 

The Zimbabwean Context

 

Zimbabwe faces significant development needs. The country requires substantial investment in energy infrastructure, roads, water systems, health services, and education. Sustainable funding for these priorities depends upon a healthy and effective tax system.

 

At the same time, Zimbabwe is seeking to attract foreign direct investment, deepen capital markets and position itself as a destination for responsible investment capital. Global investors are increasingly scrutinising not only environmental impacts but also corporate governance practices, including tax governance and transparency.

 

This is particularly relevant for sectors such as mining, financial services, telecommunications, manufacturing, and agriculture, where tax contributions, regulatory scrutiny and public expectations often intersect.

 

In these sectors, stakeholders increasingly expect businesses to demonstrate not only profitability, but also how their operations contribute to national development.

 

For many investors today, the question is no longer “How much tax did the company pay?” but rather “Does the company’s tax strategy align with its stated ESG commitments?”

 

 

 

Responsible Tax: The Emerging Standard

 

The concept of “responsible tax” has gained traction among leading advisory firms, international organisations, and sustainability practitioners.

 

In this context, responsible tax means more than paying the amount legally due. It includes boardlevel oversight of tax risk, transparent reporting of tax strategy, avoidance of artificial arrangements that lack commercial substance, and constructive engagement with revenue authorities and other stakeholders. Responsible tax management is becoming an essential component of the ESG agenda because stakeholders are paying closer attention to aggressive tax planning and the transparency of corporate tax practices.

 

Frameworks such as the Global Reporting Initiative (GRI) 207 Tax Standard reinforce this trend by promoting disclosure of tax strategy, governance, and country-by-country tax information.

 

The GRI 207 framework is widely regarded as the first comprehensive global standard for tax transparency reporting.

 

It encourages organisations to explain:

 

• Their tax strategy;

 

• Tax governance and oversight structures; • Approach to stakeholder engagement on tax;

 

• Tax payments and economic activity across jurisdictions.

 

For Zimbabwean businesses seeking to attract international investors, adopting elements of these standards could strengthen credibility and enhance access to capital.

 

For Zimbabwe, the responsible tax agenda is also relevant to domestic policy priorities.

 

A broader tax base, stronger voluntary compliance and greater trust between taxpayers and revenue authorities can support fiscal stability without framing taxation only as enforcement.

 

This makes tax transparency a governance issue for companies and a development issue for the country.

 

Practical ways Zimbabwean companies can integrate tax into ESG

 

 

 

The ESG-tax conversation need not become an additional compliance burden. Rather, it should be viewed as an opportunity to strengthen governance and build trust.

 

Develop a tax governance framework

 

Boards should formally oversee tax risk and approve a documented tax policy that aligns with the organisation’s ESG objectives. Investors increasingly expect evidence that tax decisions are subject to governance oversight and that tax risk is managed consistently across the business.

 

Publish a tax transparency statement

 

Companies can voluntarily disclose: • Their approach to tax; Confidential This is a confidential document

 

• The principles guiding tax planning;

 

• Their relationship with revenue authorities;

 

• Their commitment to legal compliance. Such disclosures can significantly improve stakeholder confidence.

 

Measure total tax contribution

 

Most organisations focus only on corporate income tax.

 

However, businesses contribute much more through:

 

• PAYE remittances;

 

• VAT collections;

 

• Customs duties;

 

• Withholding taxes;

 

• NSSA contributions and other levies. Reporting total tax contribution provides a more complete picture of a company’s economic impact.

 

 

 

Strengthen transfer pricing governance Multinational groups operating in Zimbabwe should ensure that related-party transactions reflect economic substance and are supported by appropriate documentation.

 

Globally, tax authorities and investors increasingly view transfer-pricing governance as an indicator of responsible tax behaviour.

 

Integrate tax into sustainability reporting

 

Tax should become a regular feature of sustainability and integrated reports rather than appearing solely within financial statements.

 

Leading ESG frameworks increasingly encourage organisations to explain how tax contributes to longterm value creation and sustainable development.

 

A Strategic opportunity for Zimbabwe

 

The debate around ESG and tax should not be framed as a conflict between business and government.

 

It should be viewed as a strategic opportunity to align corporate governance, sustainable revenue mobilisation, and investor confidence. Businesses benefit from predictable infrastructure, stable institutions, and a skilled workforce.

 

Governments benefit from sustainable revenue streams. Investors benefit from transparency and reduced governance risk. Society benefits from improved public services and enhanced trust in institutions.

 

In this regard, responsible tax is not merely a compliance exercise—it is a sustainability issue.

 

As Zimbabwe continues to integrate into global capital markets and compete for investment, companies that embrace tax transparency and strong tax governance may find themselves better positioned to attract investors, manage risk, and strengthen their social licence to operate. The future of ESG in Zimbabwe will undoubtedly involve environmental stewardship and social impact.

 

But increasingly, it will also require a clear answer to an important governance question:

 

How does your organisation contribute to the society in which it creates value?

 

Tax may therefore provide one of the most credible answers.

 

 

 

DISCLAIMER The views and opinions expressed in this article are those of the author, Munetsi, Senior Tax Manager at BDO Zimbabwe, and do not necessarily reflect the official policy or position of BDO Zimbabwe.

 

This article is intended for informational purposes only and should not be construed as legal, tax or financial advice. For further information, please contact any of our specialists below: Maxwell Ngorima Tax Partner + 263 242703876 mngorima@bdo.co.zw Linroy Munetsi Senior Tax Manager + 263 242703876 lmunetsi@bdo.co.zw