Accountants save water and tax as droughts worsen

Case study firm’s water saving measures gain £100,000 tax relief. By Peter Simons, technical specialist, CIMA.

Peter Simons

There is growing awareness of the sustainability aspect of corporate social responsibility (CSR) as global warming increases. This issue is all too clear in the UK where we have just had the hottest July on record and concern about water supplies keeps growing. The good news is that there are things that accountants can do to help the environment, while at the same time cutting costs – as our case study below shows.

Sustainability and accountants

The most obvious impact of sustainability issues on accountants has been the emphasis on CSR reporting in published accounts.

David Bent of The Forum for the Future suggests that brands with environmentally friendly reputations will increasingly be favoured by consumers and investors. Although many environmental costs are external to a company, these too should be considered in decision making: they might become real costs in the future through taxation or regulation. They could even be internalised, such as having to trade emissions quotas, for example.

Environmental costs may also represent a potential risk to reputation. Even the practices of an indirect supplier further down the supply chain could damage a brand.

The long-term view

Meanwhile, accountants already recognise that sustainability is good business: it is about taking a long-term view of costs and risks. Limited resources are expensive so there are opportunities for companies to reduce costs. Management accountants provide information on physical flows and monetary costs so senior management can take sustainability into account in decision making.

According to IFAC, environmental management accounting (EMA) is ‘the management of environmental and economic performance through the development and implementation of appropriate environment-related accounting systems and practices. While this may include reporting and auditing in some companies, environmental management accounting typically involves lifecycle costing, full cost accounting, benefits assessment, and strategic planning for environmental management’.

G’s Marketing – a case study

East Anglia-based G’s Marketing, founded over 50 years ago, is a progressive family company that now has a turnover of more than £190m. It grows salad leaves and vegetables on farms in the UK and Spain. Customers include major supermarkets to which they supply own-label salads.

Their accounts department includes CIMA-qualified and trainee accountants. Peter Jones ACCA is their tax specialist. He explained how recent investment in a water filtration system for its beetroot operation shows how sustainability is good business. ‘G’s will save on water costs as 70 per cent of the water bought-in can now be recovered, treated and reused,’ he said. This will also save the company money on its metered sewage costs. As well as savings of around £125,000 each year, an important consideration was that the supermarkets G’s supply and their end customers are increasingly seeking assurance about environmentally friendly practices.

The Water Technology List

As a further benefit this membrane filtration system from Aquabio was included on the Water Technology List (WTL). It qualified for tax relief worth more than £100,000 under the Enhanced Capital Allowance (ECA) scheme.

The list is an ECA scheme for water-efficient technologies. It is managed and developed by the Department for Environment, Food and Rural Affairs (Defra) and HM Revenue and Customs in partnership with Envirowise, a government-funded environmental advice service to UK businesses.

UK industry and commerce uses around 1,300 million cubic metres of water every year. With concerns about water supplies and rising costs of water bills, Pamela Taylor, chief executive of Water UK, the industry association for water and waste water service suppliers, said: ‘Last year was dry with only around 40 per cent of the average rainfall. If 2006 is similar we must expect additional stress on water supply systems and the water environment.’

The WTL offers the potential for companies to boost their cash flow and save money through a reduction in water use by investing in products included on the list. All businesses that purchase products or gain certification for an approved system from the list not only save money through reduced water usage but may also benefit from tax relief via the ECA scheme.

For more information visit the ECA website.

Accountants save water and tax as droughts worsen

Sustainability and accountants

The long-term view

G’s Marketing – a case study

The Water Technology List

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