It Pays to be Green: Part 2

In the second in her two-part series, Dayna gives us the lowdown on sustainability strategies and how SMEs can benefit from adopting eco-friendly business practices.

Businesses play an important role in driving positive change towards a sustainable future. However, the energy that the UK uses to heat and power our non-domestic buildings is responsible for around 12% of our emissions. With energy prices set to increase, improving the energy efficiency of your business premises is an opportunity to help save the planet whilst reducing overheads. Thankfully, whether you work from home, rent or own premises, there are a number of benefits associated with being responsible for your environmental footprint.

When are sustainable improvements compulsory?

From the 1 April 2018, the Minimum Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 mean that landlords of privately rented domestic and non-domestic property in England and Wales must guarantee that their properties meet a minimum of an Energy Performance Certificate (EPC) of E. Landlords must meet this standard before granting new tenancies to new or existing tenants. From April 2020 for domestic properties and from April 2023 for non-domestic properties, the regulation will extend to all private rented properties whether or not there’s been a change in tenancy agreements.

Whenever a property owner constructs, sells or rents out a qualifying property, they require an EPC. The energy wastage generated by properties with EPC ratings of F or G is reflected in unnecessary and avoidable business costs and has a severe impact on the environment. Therefore, the effect of the new regulations is that organisations that own and rent out commercial property need to establish whether their property falls under the regulations and plan out improvements to ensure they meet the minimum level of energy efficiency. There are, of course, some exceptions and some landlords are exempt from following the regulations. You can find out more about those here.

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How can you benefit?

If the new regulations affect your property, you should have already begun to improve its energy efficiency rating. However, if your property currently meets the minimum standard it is good practice to implement sustainability measures in order to be one step ahead of any legislative changes. There’s a strong likelihood that the minimum energy efficiency rating will rise in the future so anticipating this and adopting eco-friendly energy improvements now could really benefit you in the long run. This could include upgrading outdated heating systems or replacing old windows and doors.

Aside from pre-empting Government policies, energy efficient improvements make sense economically. For tenants, energy efficient premises are known to improve air quality and increase comfort which in turn, increases productivity and employee satisfaction. Additionally, you can lower your energy bills and any business is sure to gain from a welcome reduction to balance sheet liabilities. It’s also important to note that energy efficient buildings often experience a higher resale value and attract higher rental incomes due to their sustainability and prestige. In essence, you’re ensuring the longevity of your leases by meeting a growing market demand for green buildings.

The new legislation gives enforcement authorities the power to inspect properties for non-compliance. There’s also a maximum penalty for breaching the regulations for less than three months of up to £5,000 or of up to 10% of the rateable value of the property (whichever is greater, up to a maximum penalty of £50,000). After three months the financial penalty doubles; so it’s worth checking if your property falls under the new legislation to avoid a substantial fine.

Here are some other options for embedding sustainability in your premises:

  • Track your usage: If you work from home, asking your supplier to install a smart meter is a simple way of watching your energy consumption. An in-home display can help you identify how to lower your bills. They’re free and energy companies are rolling them out across homes nationally to help consumers use electricity mindfully, but the government has set a target to provide all consumer and business customers with smart meters by 2020.
  • Carry out an audit: Identifying the most energy-intensive aspects of your property and collecting data can prompt businesses to revaluate their consumption and adopt energy saving measures. Making small changes, such as checking windows are properly sealed, upgrading old IT equipment and opting for LED lights instead of conventional lightbulbs helps reduce your impact on the environment and lower your energy costs.
  • Generate your own energy: The government introduced the Non-Domestic Renewable Heat Incentive (RHI) to offer financial support to businesses, schools and other organisations to increase renewable heat installations across the commercial, public and non-profit sector. Eligible heat technologies include solar panels and wood-fuelled burners. Payments are made over a 20 year period on a quarterly basis, and are based on the heat output of the technology. You can find out more information about the RHI here.

Claiming tax breaks on green equipment

The Government allows businesses to claim Enhanced Capital Allowances (ECA) on energy efficient products your business uses. When you consider the total cost of ownership, including operating costs and energy bills, it often works out better to opt for more energy efficient equipment.

Technology categories that are covered by the ECA scheme include types of heating and air conditioning, high speed hand air dryers and refrigeration equipment. ECAs allow businesses to write off 100 per cent of the cost of eligible technologies against taxable profits for the first year, including any costs incurred in installing and transporting the equipment. You can easily claim ECAs through your income tax or corporation tax return and the benefit of minimised tax liability can work in your favour.

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Awarding sustainable practices

Now in their eighth year, the BusinessGreen Leaders Awards crown UK businesses, individuals, public sector bodies and social enterprises that have embraced green practices. In an effort to mainstream sustainable practices, the industry-leading judges look for innovative and engaging programmes that contribute to a lower carbon economy. Winners are able to showcase their achievements with official endorsement from Europe’s most prestigious awards ceremony. It’s a platform to spotlight your progress towards a greener future and can act as a powerful marketing tool in an increasingly sustainably-driven commercial market.

If you’re able to show that your small business is green in every aspect with proven success, you could be in with a chance of bagging the Small Business of the Year Award. Actively working towards developing a more sustainable supply chain with the advice offered in part 1 of this series could lead to your organisation winning Supply Chain Project of the Year. You can enter for free and check out the rest of year’s categories here.

Entries for the 2019 edie Sustainability Leaders Awards open in summer and any size business is eligible to apply, from micro-organisation to Blue chip. Winners embrace sustainability throughout their business with a commitment to innovation and credibility. Snagging a title at the Sustainability Leaders Awards could open doors for your organisation internationally, as winners are automatically given access to the European Business Awards for the Environment under the RSA accreditation scheme. Finalists receive invaluable exposure at the awards evening as edie showcase entrants at a prestigious event in the capital.

Sustainability practices for SMEs can help limit business expenditure whilst promoting a positive and green message to consumers, businesses and stakeholders.  Managing the use of your business equipment can have a drastic impact on your energy bills or win you an award, and the tax incentive for installing energy-efficient plant and machinery is a long-term gain. Whether it’s a complete overhaul of the business model or a conscious change of daily habits, it really does pay to be green.

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This blog post was written by Dayna Chapman. Dayna is a final year MLaw student at Northumbria University and currently working in a Business & Commercial firm in the Student Law Office. Before beginning her career with a Training Contract in a commercial firm, Dayna hopes to travel around India and Pakistan to explore her grandfather’s heritage. In her spare time, she enjoys cooking and yoga.

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