How businesses can use grants and incentives to reach net zero goals

A coordinated approach to accessing grants and incentives as part of your overall tax strategy, can accelerate your journey to net zero.

Alwyn Hopkins, who leads the development of the EY UK&I tax sustainability offering, interviewed Maciej Van Der Steen, a Director in the EY Tax Grants and Incentives team, on the importance of a coordinated approach to accessing tax grants and incentives for a business’s sustainability transition, and journey towards net zero goals. 

Incentives are a key part of Government sustainability policy. They are intended to bring change and drive certain behaviours, which is increasingly important with ambitious net zero targets. 

It is important to understand the different types of sustainability incentives available and appreciate the difference between statutory incentives, such as research and development (R&D) tax credits, and discretionary incentives, such as cash grants, and how to approach each type of incentive.

This video discusses at what point in the investment lifecycle businesses can and should consider the use of grants and incentives.  For example, capital allowances and R&D tax credits can be claimed after the expense has been incurred, but businesses must apply for grant funding before any money is spent. It is recommended that businesses undertake a detailed analysis of the different types of incentives available before making investment decisions.  In summary, planning is key, and to fully benefit from incentives, early action is encouraged. 

The team also cover the diversity of opportunities available in various markets. Most grants and incentives are country or jurisdiction-specific, but there are often similarities in their target and structure. For instance, the UK Department for Business, Energy and Industrial Strategy (BEIS) runs the Net Zero Innovation Portfolio (NZIP) which provides funding for low-carbon technologies and systems. Meanwhile, the aims of the European Union’s Horizon Europe research and innovation programme include tackling climate change and helping to achieve the United Nation’s Sustainable Development Goals. The funding landscape is evolving rapidly, so the EY team have developed the Green Tax Tracker to help businesses monitor the incentives available to them in a number of key markets.

Businesses taking a proactive approach to target incentives put themselves in a better position to benefit. There are three tangible actions that businesses can take immediately to take control of their funding opportunities. Firstly, establish internal processes to ensure clear responsibility and accountability for identifying and pursuing opportunities. Secondly, develop a strategic alignment between corporate ambitions and government policies. And, lastly, put in place a screening methodology to identify, confirm and access sustainability funding opportunities as they arise.