Facility relocation and nearshoring costs may be eligible as a Value Chain Abatement (VCA) project when the move is expected to reduce operational or supply chain emissions. A fixed 10% of direct relocation costs are eligible under Tier 5 of the multi-purpose expenditure guidance.
This article defines what a qualifying relocation is and which types of costs count. The guidance applies to the relocation, consolidation or nearshoring of warehouses, distribution centers, manufacturing sites and other operational facilities, whether owned or leased by the brand. It covers moves within a country and moves that bring production or storage closer to the brand's primary markets or suppliers.
Eligibility
Relocation costs qualify when the move is expected to reduce emissions from the brand's operations or supply chain. To be eligible, a relocation must meet all of the following conditions:
Qualifying pathway. The move is expected to reduce emissions through at least one of the pathways described below.
Within the brand's footprint. The affected emissions fall within the brand's measured cradle-to-customer inventory.
A relocation must be expected to reduce emissions through one or more of the pathways below.
Pathway | What qualifies | Typical emissions affected |
Shorter transport routes | Moving closer to suppliers, customers or ports to cut tonne-kilometers, or consolidating sites to remove intermediate legs | Scope 3 upstream and downstream transportation and distribution |
Low-carbon transport fuel | A new site that gives access to rail, short-sea shipping, or carriers using renewable diesel, biomethane or other low-carbon fuels, or that shifts freight away from air | Scope 3 transportation; Scope 1 for owned fleets |
Efficiency and electrification | A building with better insulation, efficient HVAC and lighting, or heat pumps; an electrified process; or charging infrastructure that lets the fleet or yard equipment run on electricity | Scope 1 fuel combustion; Scope 2 electricity; Scope 3 transportation |
Renewable energy generation | A site that allows on-site solar, wind or geothermal, or that is served by a grid or utility tariff with a materially lower emission factor | Scope 2 electricity; Scope 1 where generation replaces on-site fuel |
Employee commuting | A site closer to where employees live, or with access to public transit, cycling infrastructure or workplace EV charging, that reduces car commuting | Scope 3 employee commuting |
Business travel | A site near key suppliers, customers or other company sites that reduces the need for flights and long-distance travel | Scope 3 business travel |
Low-GWP refrigerants | Cold storage, refrigeration or HVAC at the new site that uses low-global-warming-potential refrigerants in place of high-GWP systems at the old site | Scope 1 fugitive emissions |
Nearshoring, meaning moving production or storage closer to the brand's main markets, will usually qualify under the shorter-routes pathway and often under the low-carbon fuel pathway, because it shortens or removes ocean and air freight legs.
Boundaries
Furthermore, two key principles set the limits of what counts.
Additionality: Only costs caused by the move are eligible. Costs the brand would have incurred anyway, such as routine replacement of equipment at end of life, are not.
Leakage: A move that shifts an emitting activity to a supplier, contractor or another site where it continues unchanged does not count as a reduction pathway.
Eligible and ineligible costs
Only the direct, one-time costs of carrying out the relocation are eligible under Tier 5. Ongoing operating costs at the new site, and costs the brand would have incurred without the move, are not. Equipment and renewable generation added at the new site are not Tier 5 costs; they are weighted by their own tier.
Cost category | Eligible | Notes |
Moving equipment, inventory and fixtures | Yes | Freight, rigging, packing and temporary storage during the move |
Decommissioning the old site | Yes | Dismantling, removal and site restoration required by the lease or permit |
Fit-out of the new site | Yes | Installation and commissioning of relocated equipment; new efficient or electrified systems are weighted by their own tier |
Lease break or early termination fees | Yes | Where directly caused by the relocation |
Project management and engineering studies | Yes | Planning and coordination of the move; an emissions assessment for the move falls under OC instead |
Purchase price of buildings | Yes | Where the building itself delivers a qualifying pathway, such as a high-efficiency envelope, all-electric systems or on-site renewable generation. |
Ongoing rent, utilities and staffing at the new site | No | Operating costs, not relocation costs |
Severance, recruitment and relocation of staff | No | Not linked to emissions outcomes |
Routine replacement of equipment at end of life | No | Would have occurred without the move |
Where a cost serves both qualifying and non-qualifying purposes, brands should allocate it by a reasonable, documented method, such as floor area or share of output, and claim only the qualifying share.