The Streamlined Energy and Carbon Reporting (SECR) framework, a crucial initiative for energy reporting in the UK, requires specific entities to disclose their carbon data. This guide provides a detailed overview of SECR, including who needs to report, the disclosure requirements, secr reporting threshold, and tips on compliance and auditing. If your company falls under the SECR reporting threshold, understanding these requirements can streamline your path to compliance and enhance your sustainability credentials.
Who Needs to Report?
The SECR reporting framework mandates SECR qualification for the following entities to report their carbon data:
1. Quoted Companies: Publicly traded companies on a stock exchange.
2. Large Unquoted Companies and LLPs: Includes charitable companies, those regulated by the FCA, and PLCs that meet at least two of these criteria:
• Turnover exceeding £36 million
• Gross assets over £18 million
• More than 250 employees
Large companies are defined as those meeting these criteria for two consecutive periods. Even if a company exceeds these thresholds, it is not required to report in the first year but must prepare data for the following year. Companies with energy usage below 40 MWh are exempt but must declare themselves as low energy users.
What About Groups?
For groups, the parent company must report the combined figures for itself and all qualifying subsidiaries. Small and medium-sized subsidiaries can be excluded unless their data is significant or unavailable. Large subsidiaries cannot rely on the parent company’s report if the parent is based overseas.
SECR Disclosure Requirements
SECR disclosure is essential for companies to provide transparency in their carbon data, aligning with UK energy and reporting regulations. SECR reports must include:
• UK Energy Use: Gas, electricity, and transport energy consumption for both the current and previous year. Offshore energy usage should also be reported.
• Associated Greenhouse Gas Emissions: Emissions data linked to the reported energy use.
• Intensity Ratio: A measure that relates emissions to a business metric (e.g., production volume, employee numbers, turnover, or office space) to enable comparisons.
• Energy Efficiency Actions: A narrative detailing measures taken to improve energy efficiency, which may include renewable energy initiatives.
• Methodology: The methods used to calculate the data, including conversion factors, ensuring transparency and comparability.
What Emission Scopes Are Required?
• Scope 1: Direct emissions from company-controlled sources (e.g., gas usage, company vehicles).
• Scope 2: Indirect emissions from purchased energy, primarily electricity.
• Scope 3: Other indirect emissions, including business travel using third-party transport (e.g., employee-owned vehicles, trains, flights).
Where Can I Find the Data?
Companies should gather data from reliable sources like meter readings, supplier invoices, or annual statements. For complex data like fuel consumption, proper data collection processes are crucial. In cases where data is unavailable, estimates based on previous data, pro-rata calculations, or benchmarking should be used as a last resort. Many companies outsource this task to specialized consultants.
Auditing and Compliance
There is no mandatory external assurance requirement for SECR disclosures, but auditors must ensure that the information:
• Is consistent with financial statements
• Meets legal requirements
• Is free from material misstatements
Fines and Penalties for Non-Compliance
The Financial Reporting Council (FRC) oversees SECR enforcement. Companies failing to provide adequate information may face rejection by Companies House, leading to fines for late submission. These penalties can range from £150 to £7,500, depending on the company type and the delay in submission. Additionally, the Conduct Committee of the FRC can impose civil penalties of up to £50,000 for non-compliance and issue a public censure, which can significantly damage a company’s reputation.
Starting with SECR Reporting
Companies beginning SECR reporting should start by understanding their energy usage, which can identify cost-saving opportunities and potential for renewable energy adoption. Reporting can differentiate companies from competitors and highlight sustainability efforts in strategic reports. This process may also open up opportunities for R&D tax credits. If you are unsure about where to begin, Net Zero Now’s team of climate experts are here to help. Contact us today.
FAQs
• Is SECR mandatory?
Yes, SECR is mandatory for all UK companies that meet the reporting thresholds.
• How does SECR differ from ESOS?
While both SECR and ESOS (Energy Savings Opportunity Scheme) focus on improving energy efficiency, SECR requires annual reporting of energy use and carbon emissions, whereas ESOS requires a four-yearly energy audit.
• Who needs to comply with SECR?
Quoted companies, large unquoted companies, and large LLPs meeting specific financial and employee thresholds must comply with SECR.
• What are the exemptions to SECR?
Companies with energy usage below 40 MWh during the reporting period are exempt from SECR reporting but must declare themselves as low energy users.
• When did SECR come into effect?
Companies need to provide SECR-accordant information in their Director’s Report from the financial year starting April 1st, 2019, and every financial year after.
• Does SECR include Scope 3?
Reporting Scope 3 emissions is voluntary but strongly recommended for quoted companies.
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