The transition to a carbon neutral economy is set to be a major theme in the coming years, as both government and businesses are looking to tackle climate change and achieve goals of becoming fully net-zero carbon.
On a national level, the UK government is aiming to be completely carbon-neutral by 2050 and, while there are currently no fixed targets for individual businesses, they will also be expected to start planning now for the journey to net zero operations.
We’ve found that more of our customers are now asking us about issues such as renewable energy plans and carbon footprints. And there are good reasons to focus on this area, as no matter what industry you’re in, net zero matters more than ever.
Why net zero goals matter
Firstly, firms that can demonstrate their commitment to going green stand to see their reputation increase among consumers, and this can translate directly into revenue. For instance, one 2020 study by IBM found that globally, around eight out of ten people say they value sustainability from companies, with 70 percent prepared to pay a premium of 35 percent, on average, for brands that are sustainable and environmentally responsible.
However, it’s not just consumer-facing firms that stand to benefit. In many cases, organisations that do business with other brands also need to prove their commitment to net zero – and will lose business opportunities if they don’t.
Many large firms now require their supply chain to have plans for reducing their emissions. Big consumer brands such as supermarkets increasingly won’t work with suppliers that don’t make efforts in this area, and public sector organisations are now required to take this into account when considering tenders.
In June, for example, plans were announced that will require any company bidding for a government contract worth over £5 million to have a “clear and credible carbon reduction plan” that will see them achieve net-zero status by 2050.
Minister for efficiency and transformation Lord Agnew said: “Requiring companies to report and commit to reducing their carbon emissions before bidding for public work is a key part of our world-leading approach. These measures will help green our economy, while not overly burdening businesses, particularly SMEs.”
These attitudes will continue to filter down in the coming years, so it’s therefore clear that if any business wants to be viable in the future, a commitment to carbon neutrality is no longer optional. In the longer term, not making efforts in the area will cost more money as it limits your opportunity to do business.
Take advantage of the incentives on offer
One great way in which firms can make progress down this path is by taking advantage of new tax breaks. Introduced in the 2021 Budget, the new ‘super-deduction’ has been brought in to kick-start capital investment on items such as plant and machinery and boost productivity in the wake of the Covid-19 pandemic.
The Treasury explained: “Making capital allowances more generous works to stimulate business investment. As a result, these measures can promote economic growth and counter business cycles. The super-deduction will give companies a strong incentive to make additional investments, and to bring planned investments forward.”
This means businesses making expenditures on certain items between April 1st 2021 and 31st March 2023 can claim first-year tax relief of 130 per cent – up from the usual rate of 18 per cent. Meanwhile, a 50 per cent relief will also be available for other assets that would normally qualify for a six per cent write-down allowance.
As a result, a company spending £1 million on new qualifying equipment and machinery will be able to deduct £1.3 million from its taxable profits, saving 19 per cent of this (£247,000) on its corporation tax bill.
Turning investments into net-zero progress
While there are a wide range of items that can benefit from this tax break – from computer equipment to office furniture – among the most significant will be products that can help make firms more energy efficient and reduce their dependence on fossil fuels.
For instance, among the items able to be claimed for either the 130 per cent or 50 per cent rates are:
- Solar panels
- Wind turbines
- Electric vehicle charging points
- Heat pumps
- Building monitoring and management systems
- LED lighting
- Energy storage solutions
- Energy efficient heating and cooling systems
This gives businesses the perfect opportunity to improve their energy solutions to make sure they’re well-equipped for a low-carbon future at a reduced cost. This not only offers financial benefits through reduced energy usage overall, but means you can invest in clean energy-generation equipment that will show to customers and supply chain partners alike you’re serious about reaching a goal of net zero.
There are many ways to achieve this, and if you’re just starting out on this journey, it can be difficult to know where to begin.
That’s why it helps to reach out to an expert consultancy partner like Pulse Business Energy. We can offer advice on renewable energy tariffs and help you identify which investments are right for you. This may not always be big-ticket equipment like solar panels. Putting in place the basics such as smart monitoring and management equipment can also go a long way to improving your overall performance.
Developing a clear, holistic strategy before making any investment ensures you’re not only making progress but can also prove this when asked.
If you’re not sure where to start and need some expert, impartial advice, get in touch with Pulse Business Energy today to see what solutions would work best for you, and how you can use new incentives to your advantage.