Incentives, grants, and subsidies: Unlocking opportunities for great ideas to succeed

Fundamentally, these funding bodies provide the monetary capability to nurture and support the best ideas from all sectors, but particularly for those initiatives supporting the green transition, sustainability or with societal benefit. Understanding and effectively managing tax incentives, as well as grants and subsidies, can unlock significant opportunities. This is relevant in Denmark and across the European Union (EU), where a robust framework of support exists, especially for sustainable projects and green initiatives. For projects planned outside of Europe, other governments are also keen to attract innovative companies to their jurisdictions. 

In Denmark, a country renowned for its commitment to green energy and sustainability, there are opportunities for organisations to leverage incentives to fund and expand their green projects. There is a highly skilled and well-educated workforce where innovation, creativity and research permeate the business culture. There is a fantastic infrastructure, digitally and otherwise. More broadly, the global push towards sustainability has opened numerous avenues for innovation and growth. Whether it's developing renewable energy technologies, improving energy efficiency, or creating sustainable products and services, the right financial support can be a game-changer or lifeline. 

Previously, my colleague,  Francois Marlier, has talked about the reluctance of companies to use incentives in 'Tax policy: sticks and carrots on the road to net zero' 

The key reason that incentives are implemented in tax policy by governments is to enhance the competitive advantage of a company and its idea. Practically, the financial support can help businesses reduce expenses through tax incentives, reduce energy costs, increase cash flow or subsidise training programs. By leveraging these opportunities, organisations can allocate their resources more efficiently and invest in great ideas and particularly those that benefit society and the economy.

Incentives, grants and subsidies can be divided into tax related and non-tax related types. An obvious example of a tax related incentive example in Denmark is the R&D deduction for tax purposes. There are nearly 200 policy tools in effect by the Danish government to enable growth of an idea of a company in different sectors, regardless of the maturity of the idea.

Beyond national tax incentives, there is a generous, but confusing landscape of national grants and subsidies, i.e. the non-tax related types, which are available to support great ideas from the initial research to pilot projects through to international commercialisation. There are several funds in Denmark which offer opportunities to research and test ideas. Innovation Fund Denmark and EUDP in Denmark operate in this space to support those initiatives which benefit society.

Outside of Denmark, there are even more grants and subsidies available at both EU and international level. For organisations operating within the EU, additional funding opportunities are available through various programs and initiatives. Importantly this funding is not only available for mature projects; the financial instruments provide support for the entire span of the project maturity scale. For example:

1. Horizon Europe: This is the EU’s flagship research and innovation program, i.e. this fund targets early-stage ideas and immature technology. There are vast sums for concepts and projects that address global challenges, including climate change and sustainability, but which require R&D by businesses and organisations.
2. Innovation Fund: This is the EU’s key funding mechanism for its climate policy ambitions. Through grants and auctions, projects for deployment of net zero and innovative technologies. are supported. These projects are typically pilot projects testing the commercialisation potential of the idea and enhance the competitive advantage of the company.
3. CEF: These EU funding instruments fund projects that are larger in size and scope, such as implementation of energy and transport infrastructure. They promote growth, jobs creation and competitiveness at European level.

There are other EU funds which promote and fund important projects such as those relating to social cohesion. The LIFE programme is significant for companies in Denmark to be aware of.

Successfully identifying and managing incentives requires a strategic and structured approach, which can be broken down into three recommendations:

1. Getting started: ‘Thorough Evaluation of upcoming projects’: The incentives, grants and subsidies area shifts regularly. This is exacerbated by the information held by different agencies, organisations and so on. A different approach to consider is ‘What are the strategic initiatives that your organisation is focusing on? Which need support?’. Our team of experts are well versed in simplifying the identification and evaluation of incentives that could support your projects.
2. Engaging with the right experts: Enable a true 360 approach. We have a global team who have the unique blend of capabilities to help connect projects to potential opportunities. A team which comprises tax advisers, grant consultants, and other sustainability incentive experts, working together.
3. Preparation of strong proposals and rigorous documentation. Applying for incentives, grants or subsidies, requires significant effort in preparing proposals. You must clearly outline the benefits of your projects and support with the required documentation. And the requirements of funding programs vary. Many worthy projects fail to secure funds, or are forced to return funds, because of inadequate documentation.  Again, we have an experienced team, who have supported organisations through the process with our technology-enabled solutions.

In order to build a more sustainable and connected society, leveraging financial incentives can significantly enhance the viability and success of great ideas and great projects. Companies in Denmark have a wealth of opportunities through various tax incentives and non-tax grants and subsidies, nationally and beyond.

So, consider your strategic ideas and projects – is lack of funding the key block? By following the approach above, the chances of securing the necessary funding to grow your project and your company, will improve.