Only 16 percent of tax and finance departments are actively involved in corporate sustainability efforts, according to a new survey by Ernst & Young.

As a result, the majority of companies are not taking advantage of ways to reduce energy usage and carbon emissions, switch to alternative energy sources and rely on cleaner technologies. The survey polled 223 tax directors, corporate sustainability officers and other senior executives at companies, primarily in the U.S.

More than 37 percent of the respondents were unaware of government sustainability incentives and credits, and just 17 percent of those who were aware took advantage of them. The poll respondents’ awareness of tax incentives fell sharply between federal incentives (with more than 80 percent aware) and state incentives (about 50 percent aware), leading to missed opportunities.

For some incentives, such as federal tax deductions for energy efficient buildings and incentives for renewable energy, awareness levels were over 80 percent, leaving less than 20 percent unaware. However, for state tax credits and incentives, awareness levels hovered around 50 percent and were even lower for local credits and incentives.

For example, at the federal level, the Section 179D energy efficiency tax deduction for commercial buildings can reduce the cost of green building strategies and help building owners minimize their energy consumption and improve energy efficiency. For facilities that produce and sell electricity generated from certain renewable resources, another section of the Tax Code, Section 45, provides an annual credit per kilowatt hour of energy sold to an unrelated person or company for each of the first 10 years of operation of a renewable energy facility.

Some states offer their own tax incentives. North Carolina, for example, offers a tax credit equal to 35 percent of the cost of eligible renewable property constructed, purchased, or leased by a taxpayer and placed in service in North Carolina during the taxable year. The credit is limited to $2.5 million per installation for all solar, wind, hydro, geothermal, combined heat and power, and biomass applications used for a business purpose.

New Jersey offers a 100 percent tax credit for businesses engaged in manufacturing wind energy equipment, up to $100 million. In order to qualify for the tax credit, a business must make a minimum capital investment of $50 million in a qualifying wind energy facility that employs at least 300 new full-time employees.

“Reducing energy consumption and carbon emissions, switching to alternative energy and fuel sources, innovating for cleaner technologies and offsetting carbon emissions—all of these efforts have tax considerations,” said Paul Naumoff, global and Americas leader of climate change and sustainability services and cleantech tax services at Ernst & Young. “Companies with tax departments that aren’t taking sustainability efforts into account are missing an opportunity.”

Among the survey respondents whose companies have or are developing sustainability strategies, only 19 percent said their company uses different payback or return on investment targets to evaluate expenditures related to environmental sustainability projects as compared to required payback period or ROI requirements for typical internal capital expenditure approvals. Given the lower ROI of some sustainability projects, it is important for tax directors to be integrated into the planning process, in order to reduce the overall cost through the use of all available incentives, the report noted.

For more information, download the report "Working Together: Linking sustainability and tax to reduce the cost of implementing sustainability initiatives" at www.ey.com/climatechange.