The costs of carbon neutrality

The costs of carbon neutrality

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Earlier this week, M&S unveiled a £200m plan to become carbon neutral by 2012. Under the aims of its 100-point 'eco-plan', the firm has committed to stop using landfill sites for waste, reducing its energy consumption, increasing the amount of recycled products and better promotion of ethical trading. Chief executive Stuart Rose pledged that the extra costs of implementing the plan would not be passed onto customers.

But what do you think? Can businesses really absorb the costs of the such a plan without being forced to hike up prices? And are there really profits in going green?

And what about forcing firms to act? Should companies be left to introduce environmentally friendly measures themselves or should the government introduce regulations to force businesses to become carbon neutral?

Dan Martin
Business Editor
AccountingWEB

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By E3Consulting
10th Feb 2007 13:03

Carrots & Sticks - Property Taxation
Taxation may well be driving some aspects of their thinking. Besides M&S unlikely to bear all the cost in-house.

STICKS
The ever increasing rate of Landfill Tax, combined with the more restrict waste management requirements could explain the desire to reduce landfill waste and so save time and cost.

No doubt some of this will be pushed back to suppliers further down the supply chain for example, just-in-time logistics will push 'waste' back to suppliers whereby they hold stock and suffer any 'perishable' waste not M&S. Additionally packaging is another major factor with all retailers, this could be address by reduced packaging - but the fear is that this will lead to reduced quality through increased 'damage in transit'. Secondly the onerous for waste removal can again be pushed back to suppliers to ensure that they collect & remove their own packaging waste.

CARROTS
Energy efficiency assets should attract enhanced capital allowances (ECAs) at 100% FYA rather than 25%WDA. Whilst this is mainly a cashflow benefit as the assets - boilers, regeneration, solar systems, water saving measures etc are generally qualifying for plant & machinery allowances.

With the almost daily mentions of Green taxation, Low & Zero Carbon, Carbon Capture and trading there is undoubtedly a coporate social responsibility 'dividend' for the early adopters - leading to some customer recognition which couldwell lead to improved trading. Over time such initiatives will become the norm and so have limited fiscal benefit from a pure trading position.

It would be too politically senistive to mandate action, especially within SME businesses - as these are less able to withstand the incremental costs in modifying premises and operating procedures: Unless further tax incentives are available - perhaps FYAs such mirror the R&D credits and give >100% for the smallest businesses.

www.e3consulting.co.uk

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