Streamlined Energy and Carbon Reporting (SECR): more and more people are talking about it, but do you understand what it is and how it might impact you?
In this blog post we go back to basics and cover everything you need to know – what SECR actually is, whether or not your business is one of the 11,900 affected, and what you need to do if it is.
What is SECR?
Streamlined Energy and Carbon Reporting (SECR) was implemented by the UK Government on 1 April 2019. It’s a piece of legislation that puts more responsibility on organisations to choose how they measure and report their emissions.
SECR is a sustainability reporting framework. Since 2013 it’s been mandatory for large businesses to report their energy and carbon emissions, as well as efficiency measures that are taken throughout the year, on an annual basis.
The reporting of greenhouse gas (GHG) emissions and energy usage encourages sustainability and saves energy. The UK has been a leader in the global market in GHG emissions accounting and disclosure since 2013 when it introduced the Companies Act which required companies to report on their GHG emissions, and SECR builds on this with a much bigger focus on carbon and energy. All organisations subject to SECR must report annually on their energy use, and GHG emissions, as well as improvements they’ve made.
Who needs to comply with the SECR framework?
- The Streamlined Energy Carbon Reporting (SECR) requirement applies to companies of all sizes, including those listed on the London Stock Exchange, the European Economic Area state, or the New York or NASDAQ stock exchanges
- SECR also applies to large unquoted UK incorporated companies and LLPs regardless of their size. The definition of “large’ for Companies Act 2006 purposes is meeting two or more out of three criteria: a turnover exceeding £36 million, an asset value greater than £18 million, and having 250 or more employees
Public bodies don’t fall under the regulations, but they are still subject to other legislation involving carbon reporting.
Charities, not-for-profit companies or others undertaking public activities – like companies owned by universities, academies or NHS Trusts – also need to check whether they meet the above criteria.
Are there any exemptions from SECR?
Quoted or large unquoted companies and LLPs are exempt if they can confirm their energy use is low – 40MWh or less over the reporting period.
These companies will still need to include a statement in their report confirming that they are a low energy user.
Why is SECR important?
The importance of the UK Government’s Streamlined Energy and Carbon Reporting (SECR) scheme is clear.
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It encourages more businesses to reduce their emissions, in line with the climate change targets set out by the government
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It has far reaching implications beyond reporting – if businesses fail to comply they could face heavy fines and be seen as environmentally irresponsible
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It complies with the recommendations of the G20 Financial Stability Board's Task Force on Climate-Related Financial Disclosures (TCFD). This ensures that investors and financial actors have all the necessary information they need in order to help make a successful transition to a more sustainable and lower carbon economy
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Businesses have to submit their SECR reports in their annual directors' report, which means that their sustainability progress can be easily analyzed by stakeholders, employees and customers
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SECR provides an efficient way for companies to monitor carbon emissions over a period of time as there’s no need for multiple reports covering different dates
Photo by Kai Bossom on Unsplash
The benefits of the SECR scheme for companies
- By using the SECR scheme, businesses can look at how they are using energy and identify opportunities to reduce their energy costs while cutting their carbon footprint
- Companies can track their environmental KPIs year-on-year, establish long-term targets for reductions, and compare current performance with peers
- With consumer demand for climate action increasing, having a good SECR compliance rating can be beneficial for marketing purposes as it shows customers that you’re committed to sustainability
Even if you’re not legally required to report under the SECR scheme, voluntary reporting could be a great option for your company and could help propel you towards your ESG targets.
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Find out more about our real-time energy monitoring solution
The benefits for companies
Energy and carbon reporting can bring a host of benefits to the companies involved:
- Identifying low-cost or no-cost efficiency opportunities
- Boosting green and sustainability credentials
- Tracking environmental KPIs year on year
- Highlighting risks from volatile energy and commodity prices
- Delivering improved environmental disclosures
- Engaging employees in sustainability efforts
Even if you’re not legally required to report under the SECR scheme, voluntary reporting could be a great option for your company and could help propel you towards your ESG targets.
Why has SECR replaced CRC?
The Carbon Reduction Commitment (CRC) was introduced by the government to reduce carbon emissions but was quickly met with criticism due to its overly complex nature.
Fortunately, the SECR has been developed as a more effective alternative.
It aims to offer a much simpler process and also extends reporting obligations to way more businesses than the CRC did – only 4,000 reported under the CRC but around 11,900 businesses must now report under SECR.
Has SECR replaced any other policies?
Although SECR has replaced the CRC, it has not replace other existing requirements that companies may face, including:
- Mandatory greenhouse gas (GHG) reporting for quoted companies
- Climate Change Agreements (CCA) Scheme
- EU Emissions Trading Scheme (ETS)
- Energy Saving Opportunity Scheme (ESOS)
SECR is all about building on these requirements to make a more thorough and streamlined disclosure process in the UK.
What’s the difference between SECR and ESOS?
The main difference between SECR and ESOS (Energy Saving Opportunity Scheme) is what they measure: SECR focuses on a company's emissions, while ESOS examines energy use. This includes electricity, fuel, heat energy, transport-related emissions, waste disposal, the list goes on…
ESOS also only applies to large entities (under the EU definition) and – more importantly – only requires reporting once every four years and does not make you prove you’ve made reductions.
Photo by Nick Page on Unsplash
What will companies need to report?
The information required in a SECR report includes:
- Energy used during a financial year, such as electricity and gas consumption across different sources
- Renewable sources like solar power generated in-house, heat produced from co-generation processes and other non-regenerative sources like fuel oil tanks that do not comply with carbon budgets
- GHG emissions – reported in carbon dioxide equivalent (CO2e)
Every company needs to report their Scope 1 and 2 emissions, and unquoted companies are also required to report on their emissions from business travel in Scope 3.
Here’s a quick breakdown of what’s included:
- Scope 1: Includes emissions from activities owned or controlled by your company that directly release emissions into the atmosphere e.g. the gas used to heat your building
- Scope 2: Covers your indirect emissions associated with the purchase of electricity, steam, heat, or cooling
- Scope 3: Includes emissions that you do not have direct control over, but that you can influence through your supply chain or the stakeholders you work with e.g. the emissions associated with employees commuting to work
Tips for your SECR report:
- Include your previous years’ figures in your SECR report
- Add your methodology for calculating your energy usage and emissions
- Include a commentary on all of the great energy efficiency measures you have implemented during the reporting period.
- Get external verification it ensure your data is as accurate and consistent as possible
In addition to this yearly comprehensive report, companies are expected to provide updates throughout the year via strategic reports that include evidence about breach of emissions limits where applicable instead of waiting for end of year measures to be taken.
SECR: your FAQs answered
We get lots of people asking us about SECR reporting, so we thought we’d answer some of the most common questions we’ve heard.
If you have any other questions, please feel free to get in touch as we’re always happy to help.
- Where do I report SECR?
If your company fits with the criteria we mentioned above, you need to include information in line with the SECR framework in your directors’ report. If you’re an LLP, you need to file a separate carbon and energy report.
If you consider energy use and carbon emissions to be of strategic importance to your company, you can make the disclosure in your strategic report instead, with a quick statement in your director’s report to explain this decision.
- When do I report SECR?
The timetable for reporting depends on your company’s year end. The requirements have applied since 1 April 2019, so any business with a year beginning on or after that date should now be including SECR in their annual report.
- How will SECR reporting be enforced?
SECR reporting will be enforced by The Conduct Committee of the Financial Reporting Council. The Committee has powers of investigation and can also apply to the courts for an order requiring you to prepare a revised report.
Penalties for non-compliance haven’t actually been published yet, but if they’re anything like those associated with ESOS or the CRC they could be pretty hefty (fines of more than £40,000 have been issued).
- I’m a quoted company – what do I need to report?
As a quoted company, you need to report the following:
- Annual global GHG emissions from activities for which the company is responsible, including combustion of fuel and operation of any facility, and the annual emissions from the purchase of electricity, heat, steam or cooling by the company for its own use
- Underlying global energy use
- Energy use and GHG emissions figures from previous year (exempt in first year)
- At least one emissions intensity ratio
- Narrative on energy efficiency measures
- Details of methodology used
- I’m a large unquoted company or LLP – what do I need to report?
As a large unquoted company or LLP, you need to report the following:
- UK energy use (as a minimum gas, electricity and transport including UK offshore area)
- Associated greenhouse gas emissions
- Energy use and GHG emissions figures from previous year (exempt in first year)
- At least one emissions intensity ratio
- Narrative on energy efficiency measures
- Details of methodology used
- How are groups treated?
If you’re part of a consolidated group for accounting purposes, you need to prepare a joint energy and carbon report. Any subsidiaries that don’t meet the thresholds in their own right don’t need to be included.
If you’re a UK parent entity of a group that meets the thresholds, you also have to report (even if you would not meet the thresholds on your own). Again, the performance of companies within the group that don’t meet the threshold can be excluded.
- What is an intensity ratio?
An intensity ratio is a way of defining your emissions data in relation to an appropriate business metric. Some common examples include:
- Tonnes of CO2e per sales revenue
- Tonnes of CO2e per total square metres of floor space
- Tonnes of CO2e per employee
CO2e stands for ‘carbon dioxide equivalent’, which includes CO2 and other greenhouse gases. It’s a standard unit for measuring carbon footprints, and you can find out more about it here.
- What if I need to omit some information?
There’s a ‘comply or explain’ clause, which allows carbon and energy information to be excluded in certain cases:
- Where it’s not practical to obtain it
- Disclosure would be ‘seriously prejudicial’ to the interest of the organisation
- Other exceptional circumstances
You should include a statement explaining what information has been omitted and why, and try your best to fill in any gaps in the future.
- What if I want to go above and beyond?
This question is music to our ears!
Companies are encouraged by the Government to go beyond the minimum requirements and voluntarily include any other material source of energy use or GHG emissions outside of the given boundaries, as well as reporting on Scope 3 emissions.
Adopting the reporting recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) is also encouraged – you can find out more about these here.
If you’re interested in improving your emissions but don’t need to under the SECR criteria, we’d definitely suggest signing up to Tech Zero. We’ve recently become part of their task force and we’re really excited to see our progress.
SECR: getting started
When it comes to SECR, there’s no need to feel daunted. We’ve come up with three top tips for getting started:
- Start collecting data on your energy usage as soon as possible
- Install energy management software to identify opportunities to reduce consumption
- Streamline your data collation with a software platform
Instead of seeing energy and carbon reporting as a compliance exercise, why not see it as an exciting opportunity to reduce your emissions? You’ll not only be helping the planet, but might even save yourself some money while you’re at it!
The Government guidance on SECR can be found here.
Want to find out how you could quickly and easily reduce your emissions? Book a demo with us today.
