Karen McFadden, tax relief expert at Catax, takes a deep dive into the subject of green construction exploring the importance of supply chains for companies to achieve net zero targets
Companies have been going green for some time but the pressure to innovate and the pace of that change are accelerating. We’re seeing the early signs of much more ambitious moves in the construction industry to ensure suppliers are playing their part. For now, it is larger companies and organisations quickening the adoption of net zero policies and reporting. But the scale of the supply chains they are working with means suppliers of all sizes will be under pressure to contribute. Striving for net zero requires a top-to-bottom approach.
A perfect example is the way two-thirds of councils in England have brought their net zero targets forward to 2030 — aiming to beat the national target by 20 years. This will only be possible if every contractor, employee and staff member helps to build a picture of the direct, embodied and operational carbon emissions each one is responsible for and works to reduce them.
Private industry is upping the ante too. Morrison Construction — a leading Scottish contractor and subsidiary of Galliford Try that employs more than 1,100 people — is aiming to reach net zero by 2045.
Through its Net Zero Carbon Initiative — which Catax is participating in — suppliers are being taken on their journey to reduce all the emissions associated with the business.
Green construction initiatives to achieve net zero targets
Morrison is ahead of the pack in recognising that net zero can’t be achieved without the participation of every supplier, some of whom may not be large enough businesses to have really got their head around net zero requirements already. Its initiative is a way of taking them on that journey too, showing third-party companies what the next 20 years are going to look like, what decarbonising is going to mean and what they need to do for their clients.
Obvious practical examples include ditching diesel generators and switching to low-emission plants and equipment. But there are other new movements in construction taking hold too. Many businesses are coming away from the ‘demolish and rebuild’ approach and adopting advanced ways to retrofit buildings instead. This means they take advantage of already embodied carbon, lowering their environmental impact. But much of the initiative involves reporting standards. One of the biggest shifts will be in procurement. Environmental Product Declarations (EPD) — describing the life cycle of each product and their environmental impact — will be commonplace. Everything will be measured, from the emissions of the cars driven to work to the on-site emissions produced by transport, machinery and construction processes — even the carbon cost of material wastage.
With this initiative, Morrison Construction is really standing out in the crowd. A huge number of SMEs are still confused by the ‘net zero’ concept. Now, alongside Allan Smith and his team, these companies not only have a place to feel included, but they also have a place to learn, adapt and, most importantly, become as green as they can.
Grants will play a key role in the green construction transformation
All companies will launch similar initiatives in time but solid emissions reporting won’t be enough on its own. Suppliers of all sizes will come under increasing pressure to become greener in their own right — whether that’s improving the environmental impact of their products, processes or services or developing entirely new ones.
For this reason, we expect the proportion of R&D tax relief claims linked to net zero to climb strongly over the next decade. Any company going green by seeking to resolve a scientific or technological uncertainty is likely to be eligible and could earn limited companies a reduction in their corporation tax bill or a cash lump sum.
Grants will play a key role in the industry’s net zero transformation too. The proportion of grants linked to net zero has risen strongly already, as our quarterly Catax Grant Tour shows.
Our client, John Gilbert Architects, is a fantastic example of innovation in construction rewarded with R&D tax credits. JGA develops ways for social housing providers to build energy-efficient homes on a budget. The company has received tens of thousands of pounds in R&D tax relief, despite previously being told it didn’t qualify.
