What Existing Taxes And Incentives Could You Use Right Now To Reduce The Carbon Footprint Of Your Business?

At the recent Cop26 meeting in Glasgow the words ‘net zero’ got bounced around a fair whack. Indeed, everywhere it seems people and businesses alike are talking about their plans for greater sustainability, and politicians are promising we’ll be net zero by the time I’ve finally worked out what TikTok is and why I don’t need it. However, while a drive towards greater sustainability is something to be celebrated, when you get into the details of net zero there remains a distinct lack of clarity of what to do, and how to do it (much like TikTok).

Working out your carbon footprint 

First things first, if a company is going to reach net zero it has to work out where it’s starting from, then it can work out where it needs to go. But how does a company work out its carbon footprint? In short, with some difficulty. While there are lots of tools out there, a lack of common methodology and standards, coupled with a lack of rigour means there remains much confusion. Then when it comes to offsetting that footprint you have the same problem in reverse. I mean how much CO2 does a tree absorb? The truth is people are not sure, but maybe somewhere between 25kg to 250kg per year.

When you have chosen your tool it is a question of methodically working through your business and working it step by step. You need a calculator, and – sorry about this – an accountant and an auditor. As noted by the FT the key people missing from COP26 were the auditors. Admittedly heads of state aren’t massive fans of hanging out with Auditors – not sure anyone is – but they should have been there. 

So how do I go about getting to net zero?

A huge shift is needed to encourage and enable businesses to work out their current position and steer where they are going, there is no avoiding that Accountants & Auditors are at the heart of that process.

In terms of auditing, BCorps are all the rage. They look at your business holistically, help you be transparent and send your customers a clear message about your intentions which is great but, for most smaller and medium-sized businesses, it all boils down to the same questions.

What is my carbon footprint and what can I meaningfully do to mitigate it?

To answer this and the other inevitable questions will take a large investment in terms of time, resources and almost certainly accountants (sorry and yes, other professional advisers are available). The first thing people in business are going to think when it comes to net zero is most likely going to be “how am I going to pay for this?”. The good news is the government already has some tax structures in place to help with this.

  1. Climate Change Levy – a tax collected by energy suppliers and paid by businesses and the public sector to encourage them to become more energy-efficient. 
  2. Carbon Price Support – to incentivise electricity generators to invest in low-carbon electricity by increasing the cost of fossil fuels.
  3. Landfill Tax – to divert waste from landfill to less harmful methods of waste management 
  4. Aggregates Levy – to encourage the use of recycled materials over the extraction of rock, sand and gravel which can damage the environment 
  5. You can claim ‘enhanced capital allowances’ (a type of first-year allowances, which is in addition to the Annual Investment Allowance) for:

There are also some grants available from Innovate UK – offers grants targeted at companies developing technology for sustainable purposes – and The Sustainable Innovation Fund – to help stimulate clean growth recovery in light of COVID-19 across all the sectors of the UK economy. Even one to create woodland and plant trees

Scottish businesses can access interest-free green loans up to £100k  to help pay for energy and carbon-saving upgrades and potentially a cashback grant of up to £20k. Scots can also apply for the Low Carbon Transport Business Loan which offers up to £120,000 interest-free to help reduce the carbon impact and fuel costs of their transport arrangements through the purchase of new, more efficient vehicles.

Ultimately, a huge shift is still needed to encourage and enable businesses to work out their current position whilst steering themselves towards a better, more sustainable future and (unlucky for some!) there is no avoiding that Accountants & Auditors are going to need to be at the heart of that process.

Businesses need clarity and they need guidance. People do too. And we need it fast. As a starting point, reach out to your accountant today to ask what you need to do now, tomorrow, and how the hell you work it all out. 

About the author: Andrew Oury, Partner and Advisor at Oury Clark.

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