Although sustainability is the driver, many carbon-reduction initiatives require genuine scientific or technological advancement—making them strong candidates for RDEC.

This article explains how sustainability-focused innovation fits within the RDEC framework, the types of carbon-reduction projects that can qualify, and best practices for documenting claims in line with HMRC expectations.

Understanding RDEC in a Sustainability Context

RDEC provides a taxable credit for companies undertaking R&D that aims to achieve an advance in science or technology. The motive—commercial, operational, environmental—is irrelevant. What matters is the technical challenge, not the business objective.

Carbon-reduction projects frequently involve:

• integrating new materials or technologies

• solving process inefficiencies with no established solution

• adapting systems for lower energy consumption

• overcoming limitations of existing equipment or software

• meeting performance targets that require experimentation

These activities typically involve resolving scientific and technological uncertainty—the core test for RDEC eligibility.

What Qualifies as R&D in Carbon Reduction Projects?

1. Materials Innovation for Sustainability

Companies across manufacturing, packaging, construction, and food sectors are reformulating materials to reduce environmental impact.

Qualifying R&D may include:

• developing biodegradable or compostable alternatives

• improving barrier properties of recyclable packaging

• reducing CO₂ intensity in cement, concrete, or composites

• enhancing durability of recycled content materials

Uncertainties often relate to strength, stability, compatibility with machinery, or shelf-life.

2. Energy-Efficient Process Redesign

Industrial process optimisation is a major area of R&D where sustainability and technical advancement overlap. Projects may involve:

• lowering process temperatures

• re-engineering airflow, steam, or thermal systems

• redesigning equipment to cut energy consumption

• integrating real-time monitoring or AI-driven optimisation

Where solutions require experimental redesign—not routine parameter changes—RDEC may apply.

3. Emissions Reduction and Pollution Control

Environmental compliance and decarbonisation often require novel engineering approaches, including:

• low-NOx combustion design

• advanced filtration or scrubbing technologies

• adapting catalysts for cleaner reactions

• capturing, storing, or reusing CO₂ emissions

When off-the-shelf technologies are insufficient, the development of bespoke solutions qualifies.

4. Circular Economy and Resource Efficiency

As companies reduce waste and adopt circular principles, R&D may include:

• systems for reclaiming heat, water, or solvents

• redesigning products for reuse, repair, or modularity

• minimising by-products in manufacturing

• automating sorting, recycling, or recovery processes

Projects requiring engineering modelling, prototyping, or complex automation typically contain uncertainty.

5. Software, Data and IoT for Carbon Tracking and Optimisation

Digital innovation plays a crucial role in carbon reduction. R&D may occur when organisations:

• develop energy analytics platforms

• integrate sensors with machine-learning models

• build predictive maintenance systems

• run simulations to forecast carbon output

If the software aims to achieve new functionality, performance, or interoperability, R&D is likely involved.

Documenting Sustainability Projects for RDEC

HMRC now requires detailed documentation through the Additional Information Form (AIF). For sustainability projects, the strongest claims:

1. Define the Baseline

• What limitations existed in current materials, equipment, or processes?

• Why couldn’t the sustainability target be met using known solutions?

2. Describe the Scientific or Technical Uncertainty

• What challenges had no guaranteed approach?

• What knowledge gaps existed in the industry?

3. List Experiments and Iterations

• Lab work, modelling, design modifications, pilot trials, prototyping, scale-up

4. Identify the Team

• Engineers, scientists, technologists, software developers

5. Include Both Successes and Failures

• RDEC incentivises the attempt—not just the end result.

Clear technical narratives aligned with the AIF significantly reduce enquiry risk.

Why Many Sustainability Projects Are Missed

Carbon reduction is often seen as an operational or compliance activity, not “research.” But under RDEC, projects are eligible if they pertain to the world of physical sciences (biology, chemistry and physics) and involve:

• uncertainty

• experimental work

• technical problem-solving

• new scientific or technology knowledge creation

• developing new or improved products or processes

Even incremental improvements can qualify if they go beyond readily available knowledge.

Many companies fail to identify qualifying projects because the innovation is embedded in everyday operations—process engineers, materials specialists, and software teams often assume their work is routine, when in reality it is industry--leading and technically uncertain to achieve.

Examples of Qualifying Carbon-Reduction R&D (by Sector)

Manufacturing

• Reducing cycle times through thermal modelling

• Low-carbon materials integration

• Emissions-control systems for high-heat processes

Food & Beverage

• Reformulating with low-impact ingredients

• Energy-efficient cooking, drying, or cooling

• Recyclable packaging development

Construction & Engineering

• Low-carbon concrete

• Energy-efficient HVAC system innovations

• Site waste-reduction automation

Software & Technology

• Carbon accounting engines

• AI-driven energy optimisation

• Digital twins for emissions modelling

The Commercial Benefits of Claiming RDEC for Green Innovation

Companies that integrate RDEC into their sustainability strategy can:

• reinvest credits into further innovation

• accelerate decarbonisation projects

• improve competitiveness

• support ESG reporting

• strengthen stakeholder confidence

In many cases, RDEC helps fund projects that would otherwise be too costly or risky to pursue.

Conclusion

Sustainability-driven innovation is now fundamental to business strategy—and it frequently meets the definition of R&D under the RDEC scheme. Companies developing low-carbon processes, materials, systems, or technologies should proactively assess their projects for eligibility.

Whether the aim is to reduce energy consumption, cut waste, improve resource efficiency, or minimise emissions, the underlying technical challenges often involve genuine scientific or technological advancement.

A careful review of carbon-reduction projects can unlock significant value, supporting organisations as they transition to a cleaner and more resilient future.

If you’d like support identifying sustainability-focused R&D opportunities, assessing eligibility, or preparing a compliant AIF, I’d be happy to help - get in touch.

Visit Claiming RDEC: Index Page.