Streamlined Energy and Carbon Reporting (SECR) compels many UK organisations to record energy and carbon emissions in their annual report, replacing the Carbon Reduction Commitment Energy Efficiency Scheme (CRC EES).
Read on to see if your businesses must comply and who is exempt from carbon footprint reporting, and when a company is permitted to not report against the regulation.
Compliance with the SECR was required from April 1, 2019, as it replaced the Carbon Reduction Commitment (CRC) and the Energy Efficiency Scheme. The legislation compelled around 11,900 UK-incorporated businesses to report their energy and carbon outputs, which was a major increase from the CRC’s requirement of 900.
SECR supplements many existing rules, including:
The SECR was introduced to maximise the benefits of carbon and energy reporting by bringing more business into scope. The reporting framework was designed to encourage businesses to implement energy efficiency efforts in order to cut costs, increase productivity, and reduce carbon emissions, thereby countering climate change.
SECR is closely aligned with the the Financial Stability Board’s Taskforce on Climate-Related Financial Disclosures, more commonly known by its acronym, the SFDR. This scheme was intended by the G20 nations as a means of giving critical information to investors and other financial participants to aid them in negotiating the transition to a sustainable, low-carbon economy.
Companies are required to comply unless they are exempted. For example, all publicly traded companies, regardless of size, that are currently required to declare GHG output, and unquoted UK-incorporated businesses that meet the ‘large’ threshold set forth in the Companies Act 2006 will be subject to extra reporting requirements, as are “big” Limited Liability Partnerships
The requirements stipulate that companies must comply with reporting if they meet any two of the following criteria:
Interestingly, public entities are exempt from the new requirements, but they are still subject to current laws that require them to disclose their carbon emissions. It is particularly important, to note that charities, not-for-profit entities, and other public bodies (such as universities, academies, and NHS Trusts) must determine whether or not they meet the requirements outlined above.
Also noteworthy, is that businesses in the private sector which are not covered by the new standards are ‘strongly advised’ to self-report.
Your GHG emissions are a key to your carbon footprint. Report to three ‘scopes’ detailed below, and note the impact of your purchased energy. You see quickly the benefits of renewable sources such as solar, wind and nuclear).
Scope 1 – direct GHG emissions
Includes emissions from activities owned or controlled by the organisation, that release into the atmosphere. Examples include emissions due to heating and cooling, and vehicles. As a minimum, you must report on the combustion of gas and fuel for transport.
Scope 2 – energy indirect emissions
Includes emissions from own usage of purchased electricity and heat where these are a consequence your activities and are from external sources. As a minimum, you must report on emissions from purchased electricity.
Scope 3 – other indirect emissions
Scope 3 emissions are the most complex, and include emissions due to the organisation’s actions, but where the source of the emissions is not owned or controlled by your organisation, and which are not classed as scope 2 emissions, such as business travel in private cars. As a minimum, Scope 3 includes those from business travel in rental or employee-owned vehicles where the organisation is responsible for purchasing the fuel.
These three scopes enable you to do more than merely calculate your carbon footprint: the data are used to identify every process or product footprint in order that small changes may be quantified and measured.
The regulations acknowledge that there are “Low Energy Users” too. These companies meet the above criteria, but only use 40MWh or less during the reporting period. Low Energy Users don’t have to show how much energy and carbon they use, but they have to say why they don’t.
Corporations and limited liability partnerships (LLPs) that utilise less than 40MWh of energy during the reporting period are not eligible for the available ‘de minimis’ exemption. These companies must, however, state in their annual reports that they consume minimal energy.
For the purposes of a group report, the low energy user requirement applies to both the parent company and its subsidiary companies.
The worldwide scope 1 and 2 greenhouse gas emissions in tonnes CO2 equivalent must be included in the directors’ reports, including all seven gases covered by the Kyoto Protocol.
Large corporations and limited liability partnerships (LLPs) that are not publicly traded must declare their energy usage, greenhouse gas emissions, and at least one intensity metric in the United Kingdom.
Your SECR report must provide a narrative explanation of the energy efficiency gains made by the firm throughout the reporting year. Include the energy savings associated with the activities if possible, and if no such actions were taken, then this too should be highlighted.
As with ESG reporting, your report must be rigorous and transparent. Verifiable data is preferred, and is best derived from meter data or invoices from suppliers. Otherwise, estimate data by using data from a comparable time period, and calculate the figures using pro-rata data.
In addition to reporting on scope 3 emissions, companies are encouraged to report on any other substantial source of energy consumption or greenhouse gas emissions. The adoption of forward-looking science-based emission targets, as well as the TCFD reporting requirements, are also encouraged. Disclosures should align with your financial year.
When it comes to carbon and energy statistics, a ‘comply or explain’ provision provides for the removal of information where it is impossible to collect the information or where release would be ‘seriously harmful’ to the organisation’s interests. Always give an explanation for information omitted.
While not needed, external verification or assurance helps to ensure data quality for both internal and external stakeholders.
As we have seen in the above, your greenhouse gas contribution and carbon dioxide output tally to deliver your carbon footprint, and this steers you to energy efficient alternatives.
Human activities influence the outcome, hence why you might deploy simple measure readily noticeable by stakeholders as part of your sustainability journey.
Whether you are reporting under SECR voluntarily or because it is required, your sustainable business initiatives, and the detailed measures you are taking to lower your carbon and GHG output, are good for the planet.
Capitalise upon every measure taken and detail all progress in your Environment, Social, and Governance report. It’s here that your efforts to lower your consumption of natural resources can be aligned with the UN Sustainable Development Goals (SDGs) and demonstrate that your organisation is fighting the challenge of global warming.
If carbon neutrality is your goal, as it is for the manufacturing sector, then carbon offsetting will almost certainly play a role. It is via your carbon footprint calculation that you can calculate your annual footprint, deduct what you will save through carbon footprint measures, and anticipate the offsets required.
Be aware that carbon offsetting has a cost to the environment, but it’s generally impossible to achieve carbon neutrality without this technique. You will need to factor in the costs of external verification and validation, ideally to PAS2060:2014.
Humperdinck lectures on ESG, Risk, Supply Chain, and Net Zero and both Kingston University and UCL (University College, London). He leads the daily operations at ESG Pro and specialises in matters of corporate governance. Humperdinck hails from Bermuda, has twice sailed the Atlantic solo, and recently devoted a few years to fighting poachers in Kenya. Writing about business matters, he’s a published author, and his articles have been published in The Times, The Telegraph and various business journals internationally.
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