De-bunking SECR: Addressing some frequently asked questions (FAQs)

De-bunking SECR: Addressing some frequently asked questions (FAQs)
18 June 2020

What is Streamlined Energy and Carbon Reporting (SECR)?

SECR is a government policy requiring large organisations to disclose their energy use, greenhouse gas (GHG) emissions, and related information. The aim is to further incentivise energy efficiency and the reduction of carbon emissions.

The framework came into force in April 2019 and coincides with the end of the CRC. It expands on previous methods of energy reporting, such as CRC, with the idea to broaden the scope of Mandatory Carbon Reporting (MCR) regulations, as well as to simplify energy and carbon reporting.

The number of companies that fall under new regulation will greatly increase in comparison with the CRC energy efficiency, making it more likely that your business will be obligated to comply.

To put this into context, SECR will require an estimated 11,900 companies in the UK to report their energy and carbon emissions, in contrast to 4,000 under CRC.

In this blog post we look at:


 

Who qualifies for SECR?

Companies that qualify for SECR will automatically be enrolled in the scheme. Large organisations are typically required to comply with SECR under the following criteria:

  1. Quoted companies defined in the ‘Companies Act 2006’ under Section 385, as having equity share capital listed on the main market for the London Stock Exchange; or officially listed as a European Economic State Area; or admitted to dealing on either the New York Stock Exchange or NASDAQ.
  2. All large UK registered incorporated unquoted companies defined in the ‘Companies Act 2006’ that meet two or more of the following conditions:
    - Employs 250 or more people
    - Have an annual turnover of £36m or more
    - Have an annual balance sheet total of £18m or more
  3. Large Limited Liability Partnerships (LLPs) that already report under the Energy Savings Opportunity Scheme (ESOS).
  4. Large unregistered companies that report under the ‘Unregistered Companies Regulations 2009’ and who are required to produce reports for the ‘Large and Medium-sized Companies and Groups Regulations 2008’.

Companies that do not have not comply with SECR and are typically exempt include:

  1. Companies not registered in the UK.
  2. UK subsidiaries that are covered by a parent group that already report (unless the parent is not registered in the UK).
  3. Public/private sector organisations and charities that do not file reports to Companies House.
  4. Qualifying organisations that consume less than 40,000kWh of energy per reporting year (these are exempt from making disclosures but they must declare this).

There is no exemption for involvement for energy used in other schemes – e.g. Climate Change Agreements (CCAs) or EU Emissions Trading Scheme (ETS).

What do organisations need to do?

To successfully comply with SECR regulations, companies are required to:

  • Make a public disclosure within their annual directors’ report of energy use and carbon emissions. This should include previous years' data as well as the methodologies used to calculate the disclosures.
  • Report using a relative intensity metric e.g. tonnes of carbon dioxide equivalent (tCO2e) per employees.
  • Provide a narrative on energy efficiency actions taken during the reporting period.

Reporting will align with an organisation’s financial reporting year.
 

What are the timeframes?

  • Quoted companies have been required to include their carbon disclosures within their directors’ report since 20/09/2013 as part of MCR.
  • The first publication of reports which must comply with the new requirements for those who fall within the scheme is expected to be filed with Companies House in 2020, and applies to financial years that start on, or after, 1 April 2019.
  • Reporting depends on the company's usual reporting year:

What is the scope of the reported energy and emissions?

The scope includes operations covered by the consolidated financial statement and includes the organisation's operations in the UK. Quoted companies must also include global operations. The financial statements must be clear in defining what the boundaries are.
 
Quoted companies must include:
 
Scope 1 emissions: All global Scope 1 emissions such as the combustion of fuel (both stationary and mobile (i.e. including for the purpose of transport)) and the operation of any facility (such as process and fugitive emissions). Both energy use (in kWh), and the associated greenhouse gas emissions are required.
 
Scope 2 emissions: All global Scope 2 emissions such as electricity and purchased heat and steam (and the energy use in kWh).
 
Large unquoted companies and LLPs must include, as a minimum:

  • UK energy use, and the associated emissions for natural gas consumption and the fuel used for transport where the organisation is responsible for purchasing the fuel
  • UK electricity use and associated greenhouse gas emissions.

Scope 3 is not mandatory but strongly encouraged.
 
Additional elements that can be included in the annual Directors’ Report (or LLP’s Energy and Carbon Report) comprise:

  • Comparison to previous years
  • Intensity ratio
  • Energy efficiency narrative
  • The methodology used to calculate the required information

How does SECR work alongside ESOS?

There are obvious links between SECR and ESOS. First and foremost, they are both required under government legislation. Moreover, organisations that participate in ESOS will already have a lot of information to support the development of some SECR documentation.
 
One way to differentiate the two is to remember that ESOS is assessed once every four years and SECR annually. Another difference is what they measure. For example, SECR focuses on a company’s GHG and energy consumption, whereas ESOS examines solely energy consumption.
 
They also differ through qualification criteria and approaches to how they are reported. For instance, ESOS requires a company to meet the following criteria:

  • Employs 250+ employees
  • Has an annual turnover in excess of 50 million euros (approx. £46m) and an annual balance sheet in excess of 43 million euros (approx. £40m)

ESOS does, however, run alongside SECR and requires organisations to assess their total energy use, including transport energy, and then to carry out measures to identify energy savings opportunities. Measures include implementation of ISO50001 energy management standard or carrying out energy audits across a sample of operations.

What SECR support does Ricardo offer?

We have a breadth of experience working with companies to ensure successful energy compliance. We have supported companies through CRC,ESOS and MCR and can assist your business through the SECR compliance phase with our comprehensive service which includes:

  • A dedicated and experienced team of carbon management consultants and analysts
  • A clear project brief and regular updates on the progress
  • Robust data collection, analysis and evaluation of emissions, using appropriate emissions factors and intensity metrics
  • An accurate and easy-to-understand report detailing your energy use, carbon emissions together with realistic recommendations for energy efficiency measures
  • Finalised figures ready to be disclosed in the Directors’ Annual Report or LLP’s Energy and Carbon Report
  • Full management of the compliance process, including the evidence pack
  • Optional site visit(s)

How do I get in touch?

Want to find out how Streamlined Energy and Carbon Reporting will impact your business? Call our expert energy management team on 01235 753 000 or follow the link to send us an email:

Contact us about SECR 
 

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An introduction to Streamlined Energy and Carbon Reporting (SECR):Download our summery guide to SECRDownload our free summary guide to Streamlined Energy and Carbon Reporting (SECR)

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