As the issue of sustainability becomes more important globally, the concept itself is being defined more broadly than being just about ‘going green’. No less, with recent events and commentary coming out of the Copenhagen talks on climate change, it’s clear that Alberta businesses need to find the right balance between generating profits and reducing the impact of their operations on the environment.
Greening operations comes with some upfront costs but organizations are quickly learning that there is huge potential to transform processes, systems and other organization-wide business practices in a way that positions them to create lasting value and positive impacts on their bottom line. Governments recognize the growing imperative as well. This shift has underpinned the creation of many incentive programs to support business in going green and to reward innovation across the business community.
“A lot of companies see sustainable business practices as too costly. But when they have a view to all of the programs available to reward environmental stewardship in particular, they can see that doing things in a more sustainable can actually save you a boatload of money,” says Leanne Sereda, a Calgary-based partner in the Tax Services practice of PricewaterhouseCoopers LLP.
The environmental incentives offered are applied to projects that create or use alternative fuels, reduce greenhouse gas emissions, and increase energy efficiency.
For example, Alberta’s Bioenergy Producer Credit Program provides funding to help with the production of biofuel or biogas in the province. The potential dollar value depends on the type of energy and production capacity.
There’s also the Alberta Energy Research Institute’s funding for programs that focus on reducing carbon dioxide emissions, be it through the adoption of renewable and alternative energy, clean coal, bitumen upgrading, improved recovery or water use. The value is generally over $50,000 for one-year projects and up to millions of dollars for large, multi-year pilot and demonstration projects.
While some incentives don’t apply to most companies in traditional areas, there are those that do. For example, the federal ecoENERGY program offers incentives for installing solar space and water heaters. There are also incentives to retrofit small and medium-sized businesses through the program. Companies that improve energy efficiency in commercial buildings and industrial facilities could receive a maximum of $50,000 per project, to a maximum of $250,000 per organization.
Another incentive to go green are tax credits offered for scientific research and experimental development (SR&ED). Since adopting sustainable business practices, especially around improving energy efficiency, often requires the development or improvement of technologies, many companies stand to benefit from these lucrative tax incentive programs.
“It’s an area that a lot of companies forget about and they don’t often claim,” explains David Van Den Beld, a Calgary-based SR&ED tax partner who leads the Engineering team. “There’s a whole bunch of different industries and various activities that the scientific research side applies to.”
Oil and gas, utilities, manufacturing and agricultural industries are just a few of the many industries that generate a large percentage of SR&ED tax claims. For many companies, especially the smaller or mid-market private companies, the funds generated by SR&ED claims can actually result in significant monies available for reinvestment into their operations.
“A lot of our clients aren’t maximizing their claims year-over-year either because they don’t know that their business activity qualifies, or they don’t have the experience, processes and team in place,” explains Van Den Beld. “So that’s where we come in – we can help our clients build the processes and get the training in place around their tax planning so that they maximize the benefits available through SR&ED tax credit programs.”
In Alberta, organizations can receive 10% cash back on eligible SR&ED expenditures limited to a maximum of $400,000 annually. It doesn’t matter if a business is profitable or not; it can still get that money back. Depending on size companies can also apply to get a 20% or 35% investment tax credit back from the federal government.
There is an increase in the number of businesses submitting SR&ED claims. Two reasons why are cost containment and sustainability, according to Shawn Reain, a partner and leader of PwC’s Western Canadian SR&ED practice.
“Increasingly, business is seeing that being a good corporate citizen and gaining a competitive edge are directly linked,“ he says, adding that SR&ED credits can lower the cost of adopting sustainable business practices. “It is a very lucrative program.”