5 July 2023 — Stories
by Gordon Naughton
Gordon is an Irish chartered accountant with a corporate finance and strategy background. His business supports companies’ business and funding strategy.
Today, companies’ focus on sustainability enables me to combine my professional skills with my love of nature to help businesses with their sustainable transition. Working to help SMEs access grants has shown the importance of sustainability policies that can enact and enable real change.
The European Green Deal aims to deploy 1 trillion euros over a ten-year period to meet our climate change commitments. Whilst there are significant grants and supports towards green energy, the available funding towards the circular economy and improving our recycling infrastructure and capacity doesn’t match this ambition if Ireland is to make a meaningful impact on its CO2 emissions.
In line with competition law and as part of World Trade Organisation’s rules, most grant funding is actually dedicated to research and development (R&D). There are two concerns with excessively emphasising the development of new solutions and neglecting funding for existing ones.
Firstly, this places undue reliance on futuristic “magic bullet” solutions while disregarding the urgent need to implement those we already have. Secondly, developing new solutions does not guarantee their deployment at a sufficient scale. Many green solutions require financial support to become commercially viable. Without adequate financial backing, they may remain unimplemented.
Before deploying large investments within a tight timeframe, we need to create the right infrastructure, systems and procedures. The administrative process needs to be designed in a business-friendly manner, adapted to the scale and speed of investment. We also need more collaboration between government agencies to facilitate planning timeframes and risks.
Example: Across the EU waste industry, the Environmental Protection Agency (EPA) licencing is a slow process that can take over two years. Placing constraints in the requirement of EPA licencing as part of new product development and experimental trials prolongs the project start and adds expense. Furthermore, if the project isn’t successful, the licensing spend is an abortive cost. The EPA could make the process faster, move the licensing requirements to the latter stages, or provide controlled derogations.
There is generally a gap between the additional cost to make green products and the level of premium that consumers are willing to pay. This is referred to as the Green Gap.
Without a business proposition that accurately considers the consumer’s perspective, solutions and products cannot be scaled. Companies need to address this as part of the market research and design phase. Policies should address that through levies and support to encourage more responsible consumerism and production.
Many SMEs stick to their business models and fear that transitioning is too complicated or comes with the risk of accusations of greenwashing. Start small, build the confidence, knowledge, and momentum that you need for bigger projects. Even a failed project can generate valuable learning insights and experience. If you encounter challenges or don’t know where to start, talk to your accountant.
This article is part of our Insights from SME accountants series, where small practitioners share their experience supporting SMEs with their sustainable transition. Connect with Gordon Naughton on LinkedIn.