A recent Ernst & Young LLP survey of chief sustainability officers (CSOs) and tax directors revealed a communication and awareness gap between the accounting department and efforts related to the environment and sustainability. Potentially, this gap could result in missed tax opportunities involving incentives, credits, grants and subsidies. While the survey, entitled, “Environmental Sustainability Tax Survey,” was not specific to lodging, it did highlight issues relevant to any company in our industry.
Ernst & Young surveyed 223 senior executives at companies of various sizes and industries, including communication, construction, finance, manufacturing, retail, services and transportation. Of the respondents, 19 percent were CSOs while 81 percent were tax directors or their equivalent. Alarmingly, only 16 percent of companies that either have or are developing an environmental sustainability strategy said their tax or finance departments are actively involved.
“In our experience, organizations that take a holistic approach to sustainability, with management buy-in and communication among all relevant departments, are best able to identify tax incentives and opportunities that can reduce the costs and improve the return on investment (ROI) of their sustainability programs,” Ernst & Young said.
Include Your Tax Expert
When hashing out your green building, renovation or capital expenditure plans with your colleagues and business partners, is your tax expert at the table with you? Ernst & Young says to enhance the effectiveness of your sustainability program, you should do the following: integrate and communicate your sustainability strategy and goals across all departments and levels within the company; ensure the tax department communicates with the sustainability, facilities and operations departments; and aggregate sustainability expenditures with general capital expenditures.
In the survey, 17 percent of respondents said their companies were aware of and use available incentives related to environmental sustainability initiatives but 37 percent were unaware of any such incentives. Time and time again I have reported about wise hotel owners taking advantage of federal, state and local incentives to cover the costs of their green investments. Assuming the Ernst & Young survey results reflect a general trend, that means most hoteliers also do not take advantage of available incentives.
Ernst & Young says that while environmental sustainability initiatives are often driven by stakeholder expectations and potential cost reductions, investments are usually subject to ROI or payback-period thresholds. The tax function can be an integral part of helping to meet these ROI thresholds by lowering the cost of environmental sustainability initiatives through the use of incentives and tax credits. By identifying relevant incentive opportunities, the tax department can be an effective partner in helping environmental sustainability projects meet ROI targets.
Less Awareness of More Local Incentives
Ernst & Young discovered that the more local incentives are, the greater the likelihood there is less awareness of them. With careful planning and communication across departments, however, these incentives can be identified for ongoing and future sustainability initiatives and, when properly applied, can often cover a significant portion of the cost of the sustainability investment.
As I have learned, there are times when incentives can actually exceed the cost of the sustainability investment. This can happen more easily when incentives are “stacked” or combined with other incentives to shorten the payback period and increase the ROI.
Ernst & Young’s survey includes an appendix summarizing some of the federal, state and local tax incentives available. You can access the entire report and the appendix by clicking here. Be sure to review the survey and don’t forget to include your tax guru in your most important conversations related to sustainability investments. You will be glad you did.
Chris Lane, Vice President of Environmental Affairs with Xanterra Parks & Resorts, has resigned his position. He wrote to tell me he would like to find a replacement as soon as possible. Those interested in the position should contact him at email@example.com, or by phone at (303) 600-3409. The position is based out of Denver.
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