Month: December 2015

Sustainability touches every functional area in a company. Many don’t know it – or don’t know how. When sustainability is understood, and embedded into day-to-day consciousness and decisions, it provides more value. This article examines how sustainability and Tax are related – and is one in a series examining how sustainability affects different functional areas in a company.
Ernst & Young LLP released a survey in March of 2012 on sustainability and tax. About 4/5 of the survey respondents were tax professionals, and 1/5 were Chief Sustainability Officers. Only 28% of the tax directors believed their company had a sustainability strategy or was developing one; whereas 90% of the CSOs reported that they did. This indicates a significant disconnect between sustainability and Tax departments.

Companies are leaving money on the table when they implement qualifying programs. By failing to consider government incentives, companies are failing to implement additional programs that could improve the planet, achieve public policy goals – and be done at lower cost. Here are 5 sustainability tips that will leverage government programs for a better planet.
Reduction in Energy Use: Financial incentives to reduce energy use have been around for decades. Utility companies typically have programs to reduce energy use; these incentives benefit the utilities, too – since they are less expensive than building new power plants.

The U.S. Department of Energy has a website that maps to many tax credits, rebates and other incentives to support energy efficiency, use of renewable energy sources, and to reduce pollution. The website includes a feature to sort by eligibility: residential; non-profit; agricultural; various governments; multi-family residential; schools; and others.

Energy Use in Commercial Buildings: The Internal Revenue Service allows for tax deductions for certain energy efficiency measures on commercial building properties.
IRS Section 179D first allowed deductions through 2009, and has been extended to allow deductions for improvements put into place before January 31, 2014. Qualifying projects include interior lighting systems; heating, cooling, ventilation and hot water systems. Whether this is extended or not, the types of deductions form the blueprint for many state and local deductions.

Hire the right people. Although energy reduction gets the most headlines, sustainability involves the work force, too. The Work Opportunity Tax Credit is a federal tax credit available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment. These groups include veterans, SNAP (food stamp) recipients, individuals in 18 – 39 year old age group who live in a federally designated Rural Renewal County or Empowerment zone, or an ex-felon who has been out of prison for less than one year. Wounded Warriors Tax Credit, businesses can get up to $9,600 for hiring long-term unemployed veterans with service-connected disabilities.

Repurpose postconsumer waste. According to an article by tax experts at Crowe Horwath, some states offer significant state income tax credits for the purchase of equipment used to gather, process, or manufacture products out of post-consumer waste.
This is a good example of how states can be creative in how they implement tax incentives to implement public policy. This incentive would divert waste from landfills, directing instead into other uses. This postpones or avoids the need to construct expensive new landfills. This tax policy could drive innovation. Used tires can be recycled into road materials, or flexible sidewalks (ideal to avoid buckling from tree roots).

Donate strategically to a good cause. Corporate Philanthropy is another way to link sustainability and tax. Companies can donate cash to legitimate non-profit organizations. Companies can also make non-cash charitable contributions (and submit a Form 8283).
Selection of the non-profits can be done strategically to align with business goals. For example, a sports apparel company could donate excess product to Boys / Girls Clubs for after-school athletic programs. The local school district might also qualify. A company re-doing their offices could donate the old office furniture; the local Chamber of Commerce might accept it and pass it along to a start-up business.

A core principle of sustainability is transparency on relevant economic, environmental, and social factors. The Global Reporting Initiative is the world’s foremost platform for reporting sustainability performance. Parameter EC4 is the total monetary value of financial assistance received from governments during a reporting period.

Wherever possible, track benefits received using appropriate parameters – reduction in energy use, number of veterans hired, etc. This data will be useful for Sustainability reporting, as well as review of programs to evaluate their effectiveness.

The author is not a Certified Public Accountant, and reminds you to consult your tax accountant for tax advice. But then, connecting Sustainability and Tax departments is the whole point!

This post originally appeared on Vistage’s Executive Stret Blog in Dec. 2013.

Time to wrap up your company’s performance for year-end. You’re focused on sales, profits, changes over the last year, and preparing for financial auditors. It’s also a good time to do exactly the same for Sustainability reporting. Small- and Medium-sized enterprises (SMEs) and private companies, in particular, may still be developing bits and pieces of Sustainability programs. Annual Sustainability reporting and planning takes a back seat to financial reporting and planning.

These five tips make great New Year’s Resolutions for Sustainability reporting and planning.

Begin with what you’ve got. Environmental, Safety, Homeland Security, and other regulations require reporting. Specific industries are subject to additional regulations, such as the Public Utilities Commission for utilities. Your industry may have an industry standards group or code of conduct that requires external reporting. If your company already reports this information somewhere, why not use it in your Sustainability report? Stakeholders do not see the totality of all this information – and it may be helpful for you to see it compiled all in one place. The basis for this reporting may differ, such. For example, some reporting may include manufacturing, office, and sales fleet, whereas other reporting includes operations only. Some reporting may include the company-owned operations only, and other reporting includes companies, investments, and franchises. Take care that the basis for all Sustainability reporting is consistent.

Use a cross-functional team. People in different roles will know about existing reporting, or other company programs or projects that other people don’t know. Staff from Purchasing, Sales, Operations, Environmental, Investor Relations, Human Relations, Safety, and Communications will bring different perspectives. This needn’t be a big, time-consuming effort for everyone – just get their input. If your company doesn’t have individuals in each of these functions, then scale your team appropriately; in any case, use more than one person. An external perspective can also help you. An outside resource has experience with many companies, reporting metrics, stakeholders’ expectations, and mistakes others have made in Sustainability reporting. Some consultants will perform a full-blown verification audit of the Sustainability report. Auditing is great, but your company may not be ready for it. There are many other ways to use a consultant in a supporting role and at reasonable cost.

Use common frameworks. There are several reporting frameworks for Sustainability. Customers, investors, and non-governmental organizations (NGOs) all have their own. The Global Reporting Initiative is perhaps the most commonly-used framework for comprehensive Sustainability reporting. It is scalable, and suitable for SMEs. The Carbon Disclosure Project (CDP) has a reporting framework for greenhouse gas (GHG) emissions only. CDP data from publicly-traded companies is available via Bloomberg to traders on the floor of the New York Stock Exchange. The CDP also has a prototype “water footprint” reporting framework. Using a common framework saves analysts time and money (and saves you from responding to many of their questions). It also makes your Sustainability report look more professional.

Only report what you know. Systems, procedures, controls, and the quality of data and information for Sustainability may not be as complete or as reliable as the systems you have for operations or financial performance. This is normal. Report only the data and information that can be supported by calculations, back-up data or information. Don’t guess. Consider an example where your company wishes to report on the total amount of fuel used by your company’s sales force. If you don’t have this information, don’t blindly guess “1000 gallons”. However, if the company has records that show $2100 was spent on fuel, and you can estimate the average price of fuel was $3.50 per gallon, then you have support for an estimate of 600 gallons.

Look ahead. As your company compiles your year-end Sustainability report, you’ll think “gee, I wish we had done ‘x’” or “it would be great to have data on ‘y’.” Yes, it would. While it’s fresh on everyone’s mind, and while you can create the best business case, make these improvements now. Gathering data for new reporting metrics (such as the number of gallons of fuel purchased) can take a while to implement. Work out the kinks early, so you have good data for next year. Don’t say the same thing next year – say it about something else.