IoD calls for incentives to help smaller firms accelerate journey to net zero

The UK must act to incentivise businesses, particularly those at the smaller end of the scale, to help decarbonise the economy, according to a new report by the Institute of Directors (IoD).

The organisation has unveiled the document titled “The Green Incentive: how to put net zero at the heart of business planning”, and said it sets out four specific medium-term recommendations to address what it sees as a “lack of effective incentives and support” for smaller firms to achieve net zero amid the UK and Scottish governments aiming to reach this by 2050 and 2045 respectively.

The IoD said moves it would like to see the UK government implement include introducing, with several years’ notice, a lower corporation tax rate for organisations that have achieved net zero, compared to those that have not.

The report’s author Kitty Ussher, chief economist at the IoD, said: “Since the [UK] government introduced its net zero target, there has been no structured policy initiative designed to increase the number of smaller businesses taking their own action.”

She believes such companies want to play their part, “but there is uncertainty around the short-term business case for change”, particularly given other drains on their resources.

Ms Ussher – who recently warned over the impact of higher costs on firms – added: “By creating a future wedge between the corporation tax paid by those businesses that are net zero and those that are not, there would be a clear incentive for all businesses to achieve the desired change. If implemented, we believe that this simple yet significant policy change would be a huge stride towards meeting this country’s climate change target.”