Dr. Clare Guy, Senior Consultant in our tax practice, gives an overview of some of the national funding mechanisms available to support environmental initiatives.
The Irish Environmental Aid scheme
Being environmentally friendly is not only good for the planet, but also for the bottom line. Businesses that adopt sustainable practices can reduce their costs, improve their reputation, and gain a competitive edge in the market. Additionally, sustainability is increasingly becoming a legal requirement, as both Ireland and the EU have set ambitious targets and regulations to combat climate change and environmental degradation.
In this article, we will explore the regulatory framework that shapes the sustainability agenda in Ireland and the EU, and briefly outline one of the funding schemes that is available to help Irish businesses become more environmentally friendly and socially responsible.
Regulatory framework
Ireland’s Climate Action Plan 2024 outlines Ireland’s commitment to achieving a 51% reduction in greenhouse gas emissions by 2030[1], compared to 2018 levels. The European Green Deal commits to delivering net-zero GHG emissions at EU level by 2050[2]; with Ireland committed to achieving net-zero emissions no later than 2050. These ambitious targets require significant investment and changes across various sectors, including energy, agriculture, and transport.
For businesses, this means adapting to stricter environmental regulations and investing in sustainable practices. Companies now need to innovate and adopt greener technologies to meet these targets, which may initially increase operational costs but also open up new opportunities for growth and competitiveness in a low-carbon economy. The transition to a more sustainable business model is not just a regulatory requirement but also a strategic move to future-proof businesses against the impacts of climate change.
To meet the 51% reduction in greenhouse gas emissions by 2030, Ireland has agreed to several specific sectoral targets[3], including:
- Electricity: 75% greenhouse gas reduction by 2030
- Transport: 50% greenhouse gas reduction by 2030
- Industry/Enterprise: 35% greenhouse gas reduction by 2030
- Agriculture: 25% greenhouse gas reduction by 2030
Meeting these target reductions is a journey which presents both a challenge and an opportunity for Irish businesses. Businesses are now encouraged to set Science-Based Targets (SBTs)[4]and develop comprehensive company specific Climate Action Plans, covering everything from resource efficiency to supply chain, to achieve these goals and adapt to this ambition to transition to a low-carbon, circular economy.
These measures involve measuring and reducing emissions across all scopes (Scope 1 relates to direct emissions from an organisation’s facilities, Scope 2 relates to emissions from energy purchased by the organisation, and Scope 3 emissions relates to other indirect emissions, such as those from suppliers and from the use of the organisation’s products), investing in renewable energy, improving energy efficiency, and innovating sustainable practices.
Benefits to Irish businesses
Going green offers several benefits to Irish businesses, both economically and environmentally. Here are some key advantages:
- Economic Resilience: The need to reduce our reliance on fossil fuels was especially highlighted by global events like the war in Ukraine[5]. By investing in green technologies and practices, Ireland aims to build a more resilient and self-sufficient economy.
- Circular Economy: Ireland is promoting a circular economy, which involves reusing and recycling materials to minimise waste[6]. This approach not only benefits the environment but also offers significant cost savings for businesses. Companies like IKEA are now transitioning towards a circular business, aiming to give products and materials a longer life through reuse, refurbishment, remanufacturing, and recycling. The company designs products with circular capabilities and uses renewable or recycled materials. Their sustainability strategy includes becoming a fully circular business by 2030[7].
- Cost Savings: Implementing sustainable practices can lead to significant cost reductions. For example, energy-efficient technologies and waste reduction strategies can lower utility and disposal costs[8].
- Attracting Talent: A survey by IBM showed that 67% of people are more willing to apply for jobs from organisations they consider to be environmentally sustainable and environmentally responsible[9]. By going green, businesses can attract and retain top talent who value sustainability.
- Customer Demand: 75% of Irish consumers think that climate change and its consequences are the biggest challenge for humanity in the 21st century[10], and so have turned to sustainable products and services. Meeting these demands can help businesses win new customers and increase loyalty.
- Investment and Funding: Sustainable businesses are more likely to attract investment and funding. There are various grants and supports available for businesses that commit to green practices in Ireland.
- Compliance and Futureproofing: As regulations around environmental impact become stricter, businesses that adopt green practices early will be better prepared to comply with future laws and standards.
- Reputation and Brand Image: Being known as a sustainable business can enhance a company’s reputation and brand image, making it more appealing to both customers and partners. For example, Kellogg’s aims to use 100% recyclable, reusable or compostable packaging by the end of 2025 to align their business with circular economy principles, as well as strengthening their green reputation and brand.
- Global Market Access: Many international supply chains now require sustainability from their partners. Going green can open new markets and opportunities for Irish businesses.
Whether a business is furthering its journey towards sustainability or just beginning to take serious steps in that direction, various aids are available from Ireland and the EU. These supports facilitate progression towards more eco-friendly operations and foster employee participation in these initiatives.
IDA Ireland Green Capital Grant Scheme
The IDA Ireland Green Capital Grant Scheme is a significant initiative aimed at promoting environmental sustainability and energy efficiency across Ireland.
This scheme is designed to incentivise businesses to make strategic investments to improve the environmental impact of site operations, invest in projects that go beyond the minimum legal requirements and contribute to the transition to a low carbon and resource efficient economy[11].
The Green Capital Grant supports the purchase and installation of capital items, necessary to deliver on the goals and objectives of site-specific Climate Action Plans. These site-specific Climate Action Plans must be developed prior to application for the Green Capital Grant Scheme. Incentives are designed to support multi-year projects, and to deliver impact.
The Grant Scheme covers projects that fall under one or more of the following categories of environmental aid (the list below is non-exhaustive, and is provided to show the scope and scale of support):
- Electrification of heat via heat pumps and electric boilers
- On-site renewable generation and storage to displace fossil fuels
- Electrical charging infrastructure
- Wastewater treatment
- Energy efficiency measures in buildings and processes
- Adoption of new more efficient processes
- Hydrogen production, use and storage
- Biofuel production
- Circular economy measures
- Thermal storage
The Green Capital Grant Scheme is a mechanism under the Environmental Aid Scheme, which is effective from July 1 2023 to 31 December 2026[12].
To date, the updated Environmental Aid Scheme (2023 – 2026) has seen IDA grants averaging €1,762,039 and Enterprise Ireland grants averaging €960,000. Previously, under the Environmental Aid Group Block Exemption Scheme which ran from 2014 to 2020 and was further prolonged to 2023, IDA grants averaged €1,402,000, while Enterprise Ireland grants averaged €2,529,599[13].
Applying for the IDA Green Capital Grant
In 2023, the European Union updated the General Block Exemption Regulation, reflecting an increased priority for Environmental Aid. The European Commission endorsed amendments to extend and facilitate the possibilities for aid in the area of environmental protection and energy, such as to support the rollout of renewable energy, facilitate investments in green hydrogen, support decarbonisation projects, increase energy efficiency or support green mobility. These changes further facilitate and accelerate support for the EU’s green transitions. The amendments were formally adopted on 23 June 2023.
The changing grants landscape with the new GBER rules has made identifying which activities qualified under the various GBER schemes slightly more complex. This is where KPMG’s specialised Grants team can help.
KPMG Grants Office
Get in touch
We are Ireland’s largest, longest-established, most experienced R&D Incentives practice. We operate on an all-Ireland basis. Our team consists of over 40 multidisciplinary professionals in a range of areas, such as tax, finance, science and engineering.
We have prepared grant applications for leading multinational companies on the island of Ireland, including some of the largest grant awards by the IDA and requiring Irish Cabinet approval, as well as for indigenous Irish businesses of all scales.
Our team of engineering and scientific experts assist our clients in drafting the technical aspects of the grant application and drawdown documents, ensuring the applications deliver a high degree of flexibility to accommodate potential changes in environmental priorities.
Our holistic approach to R&D Tax Credits and RD&I and environmental grant drawdowns streamlines the process for clients who are availing of both incentives by capturing the required data once.
Our RD&I and Environmental Grant experts sit within the same team as our R&D Tax Credit specialists, ensuring a streamlined dual process for clients who are availing of both incentives.
Our grant application and drawdown processes will maximise your grant while minimising the time inputs from both your engineering and finance teams.
We can help, and we’d like to meet with you to discuss your options.
Footnotes
- Climate Action Plan 2021
- European Green Deal
- Climate Action Plan 2024
- Science Based Targets Initiative
- gov - Government announces new funding to help businesses move away from fossil fuels - https://www.gov.ie/
- Ireland’s Green Initiatives | IDA Ireland - https://www.idaireland.com/
- Why the future of furniture is circular - https://www.inter.ikea.com/
- Green Business, Irish Businesses, Irish Farming, Climate Change | AIB - https://aib.ie/
- IBM Global Consumer Study: Sustainability Actions Can Speak Louder Than Intent - https://newsroom.ibm.com/
- 2021-2022 EIB Climate Survey
- Environmental Aid Scheme
- Environmental Aid Scheme
- State Aid Transparency Public Search - https://webgate.ec.europa.eu/