Insights

According to government data, over 40 of the UK’s FTSE 100 companies have signed up to the United Nation’s Race to Zero campaign, demonstrating their commitment to going green and tackling climate change. Experts have confirmed that July was recorded as the hottest month globally and finding ways for businesses to sustain a carbon neutral economy will increase in importance in the coming years.

The UK government has been very vocal about its target to become a carbon-neutral nation by 2050 and there’s an understanding among the business community that companies of all sizes should be planning now for their journeys to net zero. On top of all the recovery activity needed after the Covid disruption, how difficult is this going to be for SMEs? What help is out there to support your transition? These are the key topics addressed in this article.

Why is it worthwhile for a business to become net zero?

Being able to demonstrate a commitment to going green will undoubtably improve your business’ reputation and this is likely to generate additional revenues. A consumer study by IBM highlighted that 80% of shoppers value brands who address sustainability and 70% said they would be willing to spend up to a third more for brands that are environmentally responsible.

B2B brands can benefit from being green too because many organisations now have policies to restrict who they do business with and will prioritise suppliers who are committed to net zero. This is especially true of big brands who have centralised purchasing strategies and published environmental commitments.

Multinationals and larger firms also have long term strategies in place to reduce the carbon footprint of their supply chains and cut emissions. For instance, many brands are looking for alternative, greener ways to transport their goods and some supermarkets will reject suppliers that have a poor environmental track record. Public sector organisations need to take the green credentials of their suppliers into account when considering tenders. If your business deals with large organisations or has aspirations to do so, bear this in mind.

The government has announced that companies who intend to bid for any future government contracts worth over £5 million should be working towards net zero now and be able to demonstrate a “clear and credible carbon reduction plan” to be in place by 2050.

Green incentives for business

One way that businesses can make progress towards net zero is by investing in new green plant and machinery, taking advantage of new tax breaks like the super deduction capital allowance. This offers first-year tax relief of 130% on qualifying expenditure for purchases made between April 2021 and March 2023.

This policy means that if a company spends £100,000 on qualifying equipment, they can deduct £130,000 from taxable profits, which will shave £24,700 from the year’s corporation tax bill. 50% relief is available for other assets that fall outside of the super deduction rules.

A wide range of business equipment qualifies for the super deduction tax allowance including new IT equipment and office furniture. ‘Green assets’ like solar panels, LED lighting, heat pumps and energy efficient systems are also included. Other energy monitoring and smart management systems are also worth investigating as they will help to improve the overall management of your business expenditure in the long term and support the transition to net zero.

If you would like advice on how to invest to claim the super deduction capital allowances and understand what the long term cost implications are, please contact us via partners@rjp.co.uk