The Top Environmental Business Opportunities

Water, Food, Carbon and Environmental Resilience are the top four business opportunities in the latest report from the Ecosystems Markets Taskforce.

Water offers opportunities for its management, and for exports of water expertise and technology.  Rural businesses can be significant users of water themselves, and could be in the front line for not only flood management but also new approaches to water storage and distribution.  The rewetting of peat is one example of how extensive areas of rural land could play a valuable and remunerative part in water storage, flow management and flood protection.

Carbon will come into play through offsetting schemes for new development – including zero carbon housing – and the growing obligations on industrial producers of carbon to reduce or mitigate their carbon outputs.  The Woodland Carbon Code is already an example of this, and we should see the arrival of a Peatland Carbon Code, as peat is the largest natural repository of atmospheric carbon.

There will also be important global markets in our knowledge and expertise in measurement and management of these markets.

The Taskforce report also sets out the business case for the importance of nature to business:

  1. Business depends on nature: no nature – no business;
  2. The natural world is under pressure with stress on energy resources, and grave threats from dramatic weather events and climate change.  Placing a proper value on these assets will enable us to recognise them more appropriately and manage them more effectively.
  3. Public policy making is putting a higher value on nature.  This will open new opportunities for business.
  4. Businesses which plan for this will be the winners.

The Ecosystems Markets Taskforce comprises 10 eminent business leaders, chaired by Ian Cheshire, Chief Executive of Kingfisher plc.

The interim report issued on 6 November 2012 also offers the following interesting facts and comments on the relationship between business and nature:

  • Food demand will rise 70% by 2050; water demand by 55%
  • Energy demand is expected to have risen by 35% between 2009 and 2035
  • Global population rises by 8 billion by 2030, with 3 billion new middle class consumers
  • About 30% of UK Ecosystem Services are currently assessed as declining
  • We may be losing the potential to create one major drug every two years due to the decline in genetic diversity
  • One cup of coffee takes 150 litres of water to produce
  • About 70% of ’embedded water’ in the UK is imported in manufactured goods, food etc
  • Sustainability related global business opportunities could be worth six trillion US dollars by 2050 (2008 prices)
  • If the chemical industry had to pay for all its environmental impacts, the cost would be 43% of its earnings.
  • South West Water’s Upstream Thinking project estimates a 65:1 benefit:cost ration over 30 years for measures to improve land management practice for water supplies, at a cost of 60 pence per customer by 2015.

A full final report is due next year.  Meawhile the interim report can be seen on the defra website here.

Also see my previous post on top business opportunities in ecosystem services, here.

The publication of this report is very timely with regard to my own report’s launch at the Royal Institution of Chartered Surveyors on Thursday 15 November.  A few places are still available for the launch, so please do follow this link for more details of the RICS Thinkpiece: New Challenges in International Professional Practice: from market value to natural value.  This is a public event, subject to prior booking.  Arrival is from 5.30 pm for a 6.00 pm start.  Presentation of the new publication will be followed by a discussion with a panel of distinguished experts in this field, and there will be a short drinks reception afterwards before dispersing at 8.00 pm.  And a bonus point for chartered surveyors is that this will not only introduce you to a wide range of new points for professional practice, it also qualifies as free Continuing Professional Development.

Does Less Regulation mean Less Government? No!

Despite various initiatives to cut regulation in agriculture and other industries, there is steadily emerging a plethora of new government initiatives.  For example we have already seen Local Enterprise Partnerships (LEPs), and published maps show that some areas are not covered by a LEP at all while a few areas are covered by two.  These will soon be joined by Local Nature Partnerships and Nature Improvement Areas if the government’s Natural Environment White Paper goes ahead with all its proposals for various policies and initiatives.  Alongside these will be Assets of Community Value under the Localism Bill and Local Green Area designations, again courtesy of the White Paper with status akin to that of a Green Belt.

A central government truly committed to localism might be expected to set about dismantling itself with some urgency and alacrity, but when the growth in centrally driven initiatives is set against the stated ambition to cut ‘regulation’, there seems little evidence that this is taking place.  Discuss.

Tax Simplification Report: Rural Bits

The integration of Income Tax and National Insurance, sorting out National Insurance, simpler reporting and more consistent capital allowances are all recommended in the latest report from the Office of Tax Simplification (OTS).  These measures would all help rural businesses.

At long last we seem to be recognising that National Insurance is a tax in all but name.  Once that hurdle is passed, it should be straightforward to integrate employee contributions with Income Tax and do away with the artificial distinction between the two.  The OTS Report includes a table which sets out clearly the confusion between the two in terms of the various thresholds which are used.

This would then allow the complications of Class 2 and Class 4 National Insurance to be sorted out.  Currently self-employed people can pay both.  Class 2 is paid on a flat-rate weekly basis, and Class 4 is based on profits, and payable with Income Tax.

The report also addresses the complications which can arise from whether trade is carried on as an unincorporated business (sole trader, partnership) or as a company.  The choice of legal form should not be swayed by tax considerations, and the OTS report even goes so far as to suggest that the special way in which single-employee service companies are treated (so called IR35 arrangements) should be suspended while a new ‘Business Test’ is sorted out.

These measures could be particularly important to smaller unincorporated businesses.  In 2007/08 there were 3.6 million unincorporated businesses on the taxman’s books, and 2 million of these had a turnover of less than £20,000 a year.  You can be sure that a high proportion of these were very small rural businesses.  The report suggests that these businesses might be taxed on a quite different basis, for example turnover with fixed expenses allowances rather than profit.  However, the potential problems are recognised and the report draws a number of parallels with the current simplified flat-rate VAT schemes.  More work is clearly needed here, and the report acknowledges this.

Those of us with an interest in the history of taxation (we happy few …) will be relieved to see that the report rejects a suggestion that the tax year should be aligned to 1 April rather than 6 April.  To do so would be to sever the link with the change from the Julian to the Gregorian Calender in 1752 – a mere delay of 170 years from the Papal Bull proclaiming the change in 1582 while England was still in the grip of its Reformation period.  The OTS rejects the change for less prosaic reasons, it would just be too complicated to implement.

Consistency in Capital Allowances would be very welcome to rural businesses.  We have seen the limit on the Annual Investment Allowance cut drastically from £50,000 to £25,000.  The OTS suggests it should be left alone for longer periods, and that businesses should be allowed to spread investment over two years.  So for example a small contractor or haulier who wants to spend £50,000 on a second-hand truck has to claim a complicated combination of annual investment and plant and machinery allowances.  The OTS proposals would allow this to be spread over two years, so writing off the cost that much more quickly for tax.  This would be particularly helpful to small rural businesses whose capital expenditure is ‘lumpy’, that is to say they spend a large amount occasionally.

VAT might be a disappointment to some rural businesses.  The OTS looked at conflicting proposals to either raise the threshold for compulsory registration radically, or to reduce it.  They recommend it should be left alone, but they do suggest that VAT should be simplified for small businesses undertaking international trade.  A general raise in the threshold would be a welcome flexibility for smaller rural businesses, leaving many more with the choice of whether to register for VAT or not.  Not registering can be attractive to businesses which deal directly with consumers or with businesses that are unable to recover VAT themselves, whereas registration is a must for any rural enterprise mainly making business supplies to other VAT registered businesses.

The OTS hopes to see a response from Chancellor George Osborne in next week’s Budget.  The report itself can be seen at:  http://bit.ly/fFpDMF