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Streamlined
Energy & Carbon
Reporting (SECR)

Streamlined Energy and Carbon (SECR) Reporting is the latest UK Government scheme to encourage the development of “carbon consciousness” in UK businesses. It is aimed at around 11,000 companies and Limited Liability Partnerships and is a replacement for the Carbon Reporting Commitment (CRC) and Mandatory Greenhouse gas Reporting (MGHG) schemes.

Streamlined Energy and Carbon Reporting moves away from the fiscal instruments of other schemes. Instead, the SECR Framework aims to promote transparent corporate sustainability and encourage the implementation of energy efficiency actions that bring both economic and environmental benefits to an organisation.

It is hoped by the Government that Streamlined Energy and Carbon Reporting will play a key role in highlighting how an individual organisation is actively working towards a greener future.

SECR compliance is required for three types of business:

  • Quoted companies of any size (listed on London Stock Exchange, anywhere in EEU, New York Stock Exchange or NASDAQ).
  • Unquoted UK Companies that are defined as ‘large’ by Companies Act 2006
  • LLPs that are defined as ‘large’ by the Companies Act 2006

The Companies Act 2006 defines a company or LLP as large if it meets two of the following criteria in one reporting year:

250

employees

£36 million

turnover

£18 million

balance sheets

The SECR Regulations applies to quoted companies of any size, large unquoted companies, and large LLPs. The criteria for being large is that you meet two of the three qualifying criteria: have over 250 employees, more than a £36 million annual turnover, and an annual balance sheet more than £18 million balance sheet.

If you do not meet these criteria, you are exempt from SECR compliance.

SECR compliance is mandatory if you are a large, incorporated UK company. You qualify as large if you meet two of the three qualifying criteria: have over 250 employees, more than a £36 million annual turnover, and an annual balance sheet more than £18 million balance sheet.

The Streamlined Energy and Carbon regulations were introduced on 1st April 2019 and comes into effect for an organisation’s first full financial year that commences after that date.

SECR compliance requires that you submit an annual energy and carbon report with your annual financial reports to Companies House.

For organisations that meet the qualifying criteria, a Streamlined Energy and Carbon Report will need to be submitted with their annual financial reports to Companies House.

Your annual report must be lodged within the Directors’ Report, as part of your audited accounts. It is signed off by your Board of Directors. Your financial auditing body is only obliged to ensure data is consistent with the financial data and any inconsistencies should be flagged.

Streamlined Carbon and Energy and Reporting obligations vary from organisation to organisation. If you are a quoted company, SECR compliance requires that your reports include:

  • Scope 1 carbon emissions, including combustion of all fuels (including transport costs/fuels), process emissions, fugitive emissions.
  • Scope 2 carbon emissions, which covers the consumption of electricity, heat, steam, cooling.

Carbon emissions and consumption are global.

SECR obligations vary from organisation to organisation. If you are an unquoted company, to achieve SECR compliance, regulations require that your reports include:

  • UK energy use (minimum gas, electricity, transport)
  • Associated greenhouse gas emissions

It is also necessary to report your previous year’s energy and greenhouse gas emissions if available, as well an appropriate Intensity Ratio. Details of any energy efficient actions implemented, and the methodology used must also be included.

If an organisation’s energy usage is found to be under 40MWh in a reporting year (~10x an average UK household), it is exempt from submitting a full Streamlined Energy and Carbon Report. Instead, a statement is needed in the Director’s Report stating the organisation is a ‘low energy user’.

It is strongly encouraged that an organisation goes above and beyond the mandatory Streamlined Energy and Carbon Reporting requirements.

Intensity Ratios are a way of comparing carbon emissions within different sectors and over time.

It is up to the organisation to choose a useful intensity ratio that enables useful comparisons to other similar organisations, as well as comparing to the organisation’s previous reporting year.

For example, useful intensity ratio could be:

  • Beverages: gCO2e/litre of beverage produced
  • Retail: tCO2e/m2 of floor space
  • Financial: tCO2e/£m sales revenue

The government sees the nature of information being publicly available as a motivator in helping companies to get more involved in reducing their emissions, because similar organisations will be compared by the public, and investors.

It is important that your Streamlined Energy and Carbon Reporting intensity ratios are reported in context. For example, if you secure a new business contract and so double your turnover while your energy usage and emissions remain the same, it will give the impression of hugely improved energy efficiency. To this end, in many cases it may be useful to report on more than one Intensity Ratio. We recommend using a financial metric as well as a tailored ratio (such as tCO2/tonne of production output) to give a more complete picture.

Streamlined Energy and Carbon Reporting (SECR) requires you to disclose and provide a narrative description of any Energy Efficient Actions your organisation has implemented throughout the reporting year. It is not obligatory to undertake any Energy Efficient Actions in a year, however, if none are undertaken this must be explicitly stated in your SECR report.

Simple examples of Energy Efficient Actions for SECR include:

Streamlined Energy and Carbon Reporting looks back to identify where opportunities have been taken up in the reporting year. If possible, the resulting energy savings should also be included in the report.

There is no prescribed method for calculating energy usage and carbon emissions for an organisation, however according to the UK Government Environmental Reporting Guidelines, it is important that robust and accepted methods are used.

There is scope for interpretation but where possible it is recommended that established methods such as Greenhouse Gas Reporting Protocol, ISO Standard 14064-1:2018 and GRI Sustainability Reporting Guidelines. Also, if you have been involved in other schemes previously, such as ESOS, CCA, EU ETS, CRC, data obtained through this would be accepted.

There is a distinction between directly and indirectly determined data.

Examples of direct data that can be used for determining energy consumption data for Streamlined Energy and Carbon Reporting include:

  • Invoices from suppliers
  • Meter Read Data
  • Annual statements from suppliers; these were common in CRC reporting

Once you have consumption data in kWh, it is a matter of determining consumption of CO2e emissions using standard carbon emissions factors that are on the government website. These are updated year on year, so the factors used to calculate emissions from energy usage will need to be updated annually.

There is no legal requirement to produce a statement which shows energy consumption for a period however some energy suppliers are doing this.

With Streamlined Energy and Carbon Reporting, it is not always possible to directly determine consumption data, and this is an area where many organisations are particularly likely to struggle. When it comes to completing financial reports, organisations may unearth a data gap because they have not been gathering the data required.

Three main methods of estimation have been proposed:

Direct comparison

Using figures from another comparable period to fill the gap i.e., the same day/week/month in another year.

Pro-rata extrapolation

This method uses figures available for one period to get consumption figures for another period.

Benchmarking

Using the energy consumption of one asset or activity as a proxy to estimate the consumption of another asset.

There are not the only methods that can be used. Any robust and transparent way of determining data can be used if explained properly. An example being determining transport fuel use from expenditure on fuel cards.

It is possible to exclude certain areas of a business where disclosure would be seriously prejudicial to the interests to the organisation. This is referred to by many as the ‘Comply or Explain’ clause. Where omissions are made, they must be fully explained and reasoned, and it is emphasised in the guidance that this should only be used in exceptional circumstances.

The chance to opt-out only occurs at the start of a phase during the baseline exercise.

The next opportunity will be during the re-baselining exercise, due to happen in 2024. This allows new installations or sites that have become eligible during the phase to opt-out.

The Government has a Streamlined Energy and Carbon Reporting template that can be referenced and accessed. Please click here.

Although they are keen for organisations to use their template, to enable easier comparison with other organisations, this is at your discretion and up to your organisation and your financial teams how this is presented.

There are no formal verifications requirements, however information should be consistent with the financial statement.

Although there is no formal requirement for verification, if you have put together a report and do not feel entirely sure if you have done this right, or missed something, there are validation and consultancy services on offer to help you get it checked – so you are confident to send to your Board of Directors and include in financial statements.

Streamlined Energy and Carbon Reporting Regulations mandate Quoted Companies to report Scope 1 and Scope 2 carbon emissions, with large unquoted companies and LLPs required to report emissions from parts of Scope 1, 2 and 3.  However reporting of non-mandatory additional carbon emissions is highly encouraged, especially if there is a need for complete transparency with your clients. However, reporting Scope 3 carbon emissions can be more complex as they also occur beyond the control of your organisation.

Some organisations voluntarily report their Scope 3 emissions annually already. An example of this is ‘The Sovereign Grant and Sovereign Grant Reserve Annual Report and Accounts 2018-19’.  Where mechanisms are already in place to monitor carbon emissions, putting together a Streamlined Energy and Carbon Regulations report will be relatively straightforward.

Out of scope emissions may also be included in a Streamlined Energy and Carbon report, which are those that arise when renewable fuels are burnt. These include biogas, biodiesel, and biomass.  It may be useful to include these in an SECR report in some cases to provide a complete picture of energy use and emissions.

You may also wish to report on renewable generation and carbon offsets. There is no obligation to do so, however as information will be publicly available, it will demonstrate commitment to CSR and will work to highlight positive aspects of energy generation, energy use and emissions.

Scope 1 Carbon Emissions occur when greenhouse gases are directly emitted by an organisation to the atmosphere, most commonly this is the combustion of fuels such as Natural Gas and combustion in vehicles. Scope 1 also includes the carbon emissions from production processes that directly release greenhouse gases.

Reporting Scope 1 Carbon Emissions is mandatory under Streamlined Energy and Carbon Reporting Regulations for quoted companies. Large Unquoted Companies/LLPs are mandated to report emissions arising from Scope 1 gas, generation of electricity and transport.

Scope 2 Carbon emissions are indirect emissions caused by the generation of the electricity that is purchased and used by an organisation.

Reporting Scope 2 Carbon Emissions is mandatory under Streamlined Energy and Carbon Reporting Regulations for quoted companies. Large unquoted companies or LLPs need only include Scope 2 electricity figures (including Electric vehicle usage).

Scope 3 carbon emissions include all indirect emissions (not included in Scope 2) that occur in the value chain of a company, or in the life cycle of a product – both up and downstream.

For example, the carbon emissions from a product’s life cycle emissions stretch from raw material extraction through manufacture, transport, storage, sale, and use, all the way to disposal. This means that some of these steps may be outside of your organisations direct control. However, identifying greenhouse gas reduction opportunities upstream or downstream of your organisation can help to engage suppliers/consumers and encourage an overall reduction in greenhouse gas emissions.

Reporting Scope 3 Carbon Emissions is voluntary under SECR Regulations for quoted companies. Large unquoted companies or LLPs must include Scope 3 Transport Emission figures. An example of this would be business travel in non-company owned cars (grey fleet).

To include eligible transport in an organisation’s Streamlined Energy and Carbon Reporting submission, transport energy usage should be split into the relevant Scope and here is a brief guide to what goes where based on the UK Government’s Environmental Reporting Guidelines.

Scope 1 Transport

Transport energy usage is included in Scope 1 if an organisation purchases or reimburses the fuel used for transport directly, if the organisation operates the mode of transport and if journeys start and/or end within the UK. All types of transport are eligible, including road vehicles, trains, planes, and water going vessels. This means an organisations total energy consumption should include fuel used in:

Scope 2 Transport

If an organisation provides charging for electric vehicles used for the purposes described within Scope 1, the organisation should ensure no double counting of electricity consumption occurs. It is good practice for an organisation to separate this energy figure from other electricity usage and identify the potential emissions savings compared to fossil fuel vehicles.

Scope 3 Transport

It is mandatory for large unquoted companies or LLPs to include some (grey fleet) Scope 3 Transport energy usage and carbon emissions in a Streamlined Energy and Carbon Reporting submission. For quoted companies there is no requirement, but it is recommended, to include Scope 3 figures.

Transport that would come under Scope 3 includes:

Out of Scope Transport

Although not mandatory, an organisation should consider reporting out of scope transport if it forms a substantial part of the organisation’s energy usage or carbon emissions. An example of this would be international travel.

SECR does not replace ESOS.

ESOS reports are submitted every four years and look ahead to identify potential opportunities to improve energy efficiency in an organisation. ESOS reports should quantify the potential energy saving, as well as the financial implications of any potential opportunities to implement energy efficiency measures.

SECR looks backwards – detailing any energy efficient actions that have been implemented during the reporting year, with the idea that the benefits of such actions will show in the organisation’s Intensity Ratio (when compared to previous years’ ratios). If energy efficient actions have been put in place due to recommendations in previous ESOS reports, it is recommended that the ESOS report is referenced within the SECR section of the organisation’s annual report.

Organisations that meet the SECR inclusion criteria (Quoted company or Large Unquoted Company/LLP) are required to include the SECR obligations in their annual financial reports. Therefore, energy and carbon reporting should occur annually, with the reporting period aligning as closely as possible with the financial reporting period.

Swan Energy Know How
Swan Energy are experts in Streamlined Energy and Compliance Reporting (SECR) and our team is experienced and skilled to support your organisation.