Decarbonisation

Put tax at the heart of Net Zero.

Decarbonisation

Put tax at the heart of Net Zero.

What’s the issue?

Businesses are beginning to accelerate their decarbonisation journeys.

Their customers, employees and shareholders are all demanding it, and governments are using an array of fiscal ‘carrot and stick’ tax levers to drive behavioural change.

Businesses need to navigate this increasingly complex landscape if they are to mitigate the risks – and make the most of the opportunities. Funding remains a crucial barrier when it comes to decarbonisation, and tax leaders are uniquely placed to identify opportunities in the way of incentives, grants and reliefs. At the same time, they can provide insights on how positive changes to the business can also reduce its environmental taxes footprint.

Tax teams therefore have a vital role to play in the Net Zero journey. And while funding is a key value add, the tax function is also well placed to highlight other key issues including:

the risks to the organisation in the increasingly complex – and global – green tax and regulation landscape
the tax implications of new arrangements, such as carbon offset schemes or Power Purchase Agreements (PPAs)
the strength of your data and processes, to meet increasing compliance requirements

Out of 500 tax leaders we asked, 85% are either already using or plan to use carbon offsets as part of their decarbonisation pathway in the next two years.*

^{*Source: KPMG survey in March 2023 – of 500 UK Tax Leaders}

What’s on the to-do list?

So, what should you be doing now? What ought to be on your decarbonisation to-do list for 2023?

^1.^{Embed tax in the Net-Zero journey}

Engage with the rest of the organisation. Be part of those transformation discussions to ensure tax is at the heart of your organisation’s Net Zero transition.

Understand the tax implications of any changes to the business. And at the same time, you can add the most value to the decarbonisation journey when you know what’s happening in the business.

^2.^{Identify funding opportunities}

Review what opportunities are available, both locally and overseas. And not just green-centric incentives – consider what pre-existing reliefs can also be used for decarbonisation purposes, such as R&D tax relief or capital allowances.

Highlighting these opportunities to the business is a key way for tax to add value to the Net Zero journey.

^3.^{Stay on top of tax policy}

Keep abreast of environmental tax regulations globally.

You’ll be expected to mitigate the risks, and optimise your tax position, in a fast-moving landscape.

Manage the burning platforms as they arise. But also keep an eye on the horizon. Understand where tax policy is heading in the medium to long term.

^4.^{Review your compliance practices}

The rise in green taxes and regulations means more compliance and reporting. Review whether your existing processes and controls can respond to these changing needs.

Similarly, with new reporting metrics such as embedded carbon emissions or composition of packaging, you’ll want to assess how to access these new data points.

^5.^{Call on the experts where necessary}

Don’t be afraid to seek external advice.

Decarbonisation is an enormous undertaking. It’s hugely complex and will take you into unchartered territory.

Technical experts can help you understand the correct treatment for new arrangements, such as PPAs or carbon offsets.