In April 2019, the UK government introduced Streamlined Energy and Carbon Reporting (SECR), a mandatory reporting framework for UK companies. The aim of SECR is to help businesses reduce their energy consumption and carbon emissions by providing them with a clear understanding of their energy usage and emissions, and how to make improvements.
This guide will provide you with an overview of SECR and what you need to do to comply with the regulations.
What is SECR?
SECR, or Streamlined Energy and Carbon Reporting, signifies a major development in the UK’s approach to environmental management in the corporate sector. Initiated by the UK government in April 2019, this framework is not merely a regulatory mandate but a strategic initiative aimed at enhancing environmental accountability among businesses.
The core objective of SECR is to assist businesses in substantially reducing their energy usage and carbon emissions. This is accomplished by providing a structured and clear framework for companies to not only monitor but also report on their energy consumption and carbon emissions. Such accountability is crucial, as it lays the foundation for identifying potential areas for energy efficiency improvements.
Distinctly, SECR represented a shift from its predecessor, the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. The CRC focused primarily on large-scale energy users, but SECR broadened this scope significantly. It encompasses a more diverse range of companies, including large unquoted companies, thereby amplifying its impact across the UK’s business landscape. This inclusive approach ensures that a wider spectrum of businesses contributes to and engages with the nation’s energy efficiency and carbon reduction goals.
The SECR threshold is based on a combination of factors, including the size of a company, their energy consumption, and the amount of GHG emissions they produce. This threshold is designed to ensure that companies with significant environmental impacts are included in the framework. If a company meets two of the following criteria, they will be required to comply with SECR:
- They have at least 250 employees.
- They have an annual turnover of £36 million or more.
- They have an annual balance sheet total of £18 million or more.
In addition to these criteria, companies that consumed 40,000 kWh or more of energy during the reporting period will also be required to comply. This additional stipulation captures companies with lower financial thresholds but significant energy usage, ensuring a comprehensive approach to environmental reporting.
If your company meets the reporting threshold, you will be required to comply with the regulations. This means you will need to report on your energy and carbon information such as energy consumption, Greenhouse gas emissions (GHG), and energy efficiency measures in your annual report at the end of the financial year. This process is integral to compliance, fostering greater environmental accountability and transparency.
To comply with SECR, you will need to:
- Calculate your energy consumption and GHG emissions (Scope 1, Scope 2 and Scope 3 emissions) for the reporting period.
- Include a narrative on your energy efficiency measures.
- Report on the intensity ratio of GHG emissions to turnover, a key intensity metric.
- Compare your energy consumption and GHG emissions to the previous reporting period.
SECR reporting must be done annually, and companies must include the information in their annual reports filed with Companies House. Additionally, it is important to ensure this information is readily accessible, hence it must also be displayed on the company’s website. This dual reporting approach enhances stakeholder engagement and reinforces the company’s commitment to sustainable practices.
SECR Reporting Guidance
To comply with SECR, companies must follow a specific reporting process. This process is designed to ensure comprehensive and accurate representation of a company’s environmental impact and efforts towards sustainability. It includes:
- Identifying the scope of the report – This involves determining which companies or entities will be included in the report and the specific time period covered. It’s crucial to establish these parameters to ensure the report’s relevance and accuracy.
- Collecting data on energy consumption and GHG emissions – Companies are required to gather detailed data on their energy usage and GHG emissions throughout the reporting period. This data forms the foundation of the SECR report and is vital for understanding the company’s environmental footprint.
- Calculating energy consumption and GHG emissions – Using the collected data, companies must accurately calculate their total energy consumption and GHG emissions. These calculations should be thorough and adhere to the prescribed SECR guidelines to ensure consistency and reliability.
- Reporting on energy efficiency measures – Alongside quantitative data, companies need to provide a narrative on their energy efficiency measures. This narrative should highlight efforts made to reduce energy consumption and improve sustainability.
- Comparing energy consumption and GHG emissions to the previous year – This comparison is essential to assess the progress in reducing energy consumption and GHG emissions. It offers a temporal perspective on the company’s environmental performance and initiatives.
- Disclosing SECR information – Finally, companies must include all this information in their annual reports filed with Companies House. Additionally, to promote transparency and stakeholder engagement, this information should also be publicly displayed on the company’s website. This dual approach ensures broader accessibility and reinforces the company’s commitment to environmental stewardship.
There are several benefits to complying with SECR. These include:
- Improved energy efficiency – By reporting on energy consumption and GHG emissions, companies can identify areas where they can make improvements to reduce their energy usage and carbon emissions. This process not only aids in achieving environmental goals but also fosters operational excellence.
- Cost savings – By identifying areas where energy usage can be reduced, companies can make significant cost savings on their energy expenditure. This reduction in costs directly impacts the bottom line, making businesses more financially sustainable.
- Improved reputation – Demonstrating a commitment to reducing carbon emissions allows companies to improve their reputation and enhance their brand image. This commitment to sustainability can strengthen customer loyalty and attract environmentally conscious stakeholders.
- Compliance with regulations – Complying with SECR ensures that companies meet the mandatory reporting requirements and avoid any penalties for non-compliance. This adherence to regulatory obligations also positions companies favourably in the eyes of regulators and investors.
While there are benefits to complying, there are also challenges that companies may face. These include:
- Data collection – collecting accurate data on energy consumption and GHG emissions can be time-consuming and challenging, particularly for companies with complex supply chains.
- Reporting accuracy – ensuring that the reported data is accurate can be difficult, and errors could result in penalties for non-compliance.
- Meeting reporting deadlines – companies must ensure that their reporting is submitted on time, which can be challenging if data is collected from multiple sources.
To make SECR reporting more manageable, there are several tips that companies can follow. These include:
- Start early – collecting data and preparing for SECR reporting should be done well in advance of the reporting deadline.
- Ensure data accuracy – it is essential to ensure that the data collected is accurate and reliable.
- Seek expert advice – if in doubt, seek expert advice for SECR guidance from a specialist like McGrady Clarke.
How can we help?
In summary, SECR is a mandatory reporting framework for UK companies that aims to reduce energy consumption and carbon emissions by providing companies with a clear understanding of their energy usage and emissions. SECR reporting is required annually for companies that meet the reporting threshold, which is based on a combination of factors, including company size, UK energy consumption and GHG emissions. While complying with SECR can be challenging, there are benefits to be gained, including improved energy efficiency, cost savings, and an enhanced reputation. To make reporting more manageable and gain expert SECR guidance, book a consultation with one of our experts here at McGrady Clarke to assist you with your SECR reporting.