Excise Dept promotes ESG issues to achieve sustainable development

The department is promoting sustainable business practices by offering tax incentives for businesses that prioritise environmental concerns.

Excise Department Director General Ekniti Nitithanprapas, said environmental, social, and governance (ESG) issues are a challenge that Thailand must face, as the world undergoes transformations and places greater emphasis on the environment. The latest Global Climate Risk Index report indicates that Thailand is highly susceptible to severe environmental impacts.

In the event of an environmental crisis, Thailand will experience significant consequences, especially with impending droughts in the next two years. Industry, services, and agriculture will be affected. These challenges are becoming more frequent and pose a significant threat to the country, Ekniti warned.

Furthermore, a looming environmental challenge is the global commitment to reduce carbon dioxide emissions. Thailand has joined the Conference of the Parties (COP20) and aims to collaborate in reducing carbon dioxide emissions, targeting carbon neutrality by 2050 and achieving net-zero greenhouse gas emissions by 2065, Ekniti added.

As international efforts are being implemented, such as Europe's initiative to require reporting of carbon emissions for goods shipped to Europe starting this October, businesses must comply. Non-compliance with emissions limits in the coming years will result in taxation. The United States is also moving in a similar direction, posing regulatory challenges.

The question is whether Thailand is prepared. Currently, Thailand exports goods and services, contributing to 66% of the gross domestic product, with 50% being goods and the rest being services. ESG issues could create trade barriers, reminiscent of previous problems such as disregarding human rights in fishing, leading to negative impacts on agricultural exports. Thailand has encountered similar challenges before, but they may become more severe, Ekniti said.

Regardless of the direction crises may come from, opportunities are present in every business. The current ESG mindset does not separate its components; instead, it connects them all. Failing to do so could hinder the ability to capitalise on opportunities. Unlike before, when the economy was prioritised over the environment, today's approach must consider environmental, social, and governance factors to support business.

For example, even if a business is not directly related to the environment, incorporating environmentally conscious practices can lead to opportunities, such as increased exports. International regulations are increasingly valuing these practices. Therefore, if a business takes environmental factors into account, it can find a place within the global supply chain, according to Ekniti.

Moreover, such practices can reduce production and even financial costs, as numerous environmentally-focused financial instruments exist. These measures can decrease financial burdens. 

Thus, environmental considerations must be integrated into business strategies, rather than being secondary. In terms of society, for instance, addressing past issues such as illegal fishing, which led to Thailand being excluded from seafood exports, requires implementing systems that prioritise human rights. Ethics, risk management, and monitoring systems are necessary. The Stock Exchange of Thailand requires sustainable disclosure. Failure to comply results in a significant stock price drop, Ekniti added.

The Excise Department has set a revenue target of 500 billion to 600 billion baht per year, but long-term limitations on revenue collection may arise due to controlled goods. As a response, the department declared itself as the ESG Department, aiming not only for revenue but also economic stimulation through sustainable practices. This includes international standards, aligning Thailand with sustainability.

While revenue may not increase significantly, it contributes to the sustainable growth of the Thai economy. For instance, taxes on electric vehicles have been lowered to 2% to attract production bases as most car manufacturers are shifting to EV-only production. Popular EVs in Asean partly benefit from these reduced taxes, which align with the department's strategy. A new government will be proposed to promote environmental factors, ethics, and anything that doesn't harm the environment, all while collecting increased carbon taxes, Ekniti said.

Furthermore, the department is working on bio-plastics derived from sugarcane and molasses, offering tax reductions. This aims to promote green plastic production in Thailand, benefiting communities and farmers. The department also encourages innovation to tackle illicit cigarettes, transforming them into beneficial products for local communities. Additionally, carbon taxes are under study, Ekniti added.