Streamlined Energy & Carbon Reporting (SECR)
What it is and what it means to your business
SECR is now with us
What is SECR?
Streamlined Energy and Carbon Reporting (SECR) is the UK Government's name for the replacement legislation to a number of existing and some soon to expire programmes covering energy and carbon reporting and taxation. SECR came into force on 1 April 2019.
|CRC||Formally known as the Carbon Reduction Commitment, the scheme requires large energy users (who consume over 6,000MWh per year) to monitor, report and buy allowances for the amount of emissions they produce each year.||The scheme comes to an end following the current compliance year (2018/19).|
|CCL||The Climate Change Levy is a tax applied to electricity, gas and solid fuel use by businesses.||The main rates will be raised in April 2019 to encourage greater energy efficiency and to balance out the loss from the closure of the CRC scheme (so that it is fiscally neutral).|
|CCAs||Climate Change Agreements enable businesses to claim discounts from the CCL tax by agreeing target reductions at a sector or individual level with the Environment Agency.||Rates will increase in 2019 to account for the increase in the CCL.|
|M-GHG Reporting||Mandatory Greenhouse Gas Reporting applies to all FTSE Main Market companies and requires that they measure and report their greenhouse gas emissions on an annual basis.||Extension to all large entities including privately owned and LLPs|
|ESOS||The Energy Savings Opportunity Scheme (ESOS) requires large organisations to assess their energy use and energy efficiency opportunities every 4 years. (For more info on ESOS)||Will likely remain unchanged.|
Why do we need SECR if we are just going to pay more in CCL?
All the way back in 2006, The Company's Act described a regime where all large businesses (and we read that as all private businesses apart from SMEs) report carbon emissions in the annual reports and accounts. So far, this has been enacted only for FTSE Main Market Companies (proving ground perhaps?).
With pressures on the UK to meet its climate change targets, the government has launched SECR so all large UK companies to report their carbon emissions and energy usage on an annual basis.
But you might ask why should we not just rely on ESOS? The Energy Savings Opportunity Scheme (ESOS) stems from EU legislation and is somewhat separate from SECR. Additionally, ESOS only applies to large entities (under the EU definition) and - most importantly - only requires reporting once every 4 years and proven reductions are not obligated. Therefore, ESOS alone cannot be relied upon to generate the scale of carbon savings year on year that we need to mitigate climate change.
Who Needs to Report & Penalties
SECR is now in force & covers financial reporting years starting on or after 1 April 2019. It replaces Mandatory Greenhouse Gas Reporting (MGHG). First reports will be published in 2020 – i.e. for financial years starting on or after 1st April 2019.
The qualifying conditions are met by a company or LLP in a year satisfying two or more of the following criteria::
- Turnover £36 million or more
- Balance sheet TOTAL of £18 million or more
- Number of employees 250 or more
If you qualify, you will need to report UK energy use and associated greenhouse gas emissions relating to gas, electricity and transport, as well as an intensity ratio, information relating to energy efficiency action, within your annual reports. This is only mandatory to include subsidiaries if they qualify for SECR themselves (note - this different to ESOS where all members of a group structure apply if at least one qualifies).
If you meet the qualification conditions but consume less than 40MWh, then there is no requirement for detailed disclosure. All companies that meet the qualification criteria must comply or explain rationale (as in MGHG).
SECR will be enforced by The Conduct Committee of the Financial Reporting Council - penalties for non-compliance have yet to be published, though if these are anything like those of ESOS or the CRC they will be substantial (fines of £40,000 plus have been issued).
For FTSE Main Market companies (i.e. those previously in MGHG reporting):
Your reporting must include Global GHG Protocol Scope 1 and Scope 2 emissions and your previous year’s figures (except in the first year).
Your methodology must include:
- At least one intensity ratio
- Global energy use kWh (including previous year’s figure from year two) - NEW
- Information about energy efficiency action taken, leading on from recent ESOS assessments - NEW
- State what proportion of your energy consumption and emissions are related to emissions in the UK and offshore area
For other Large Entities - including AIM, privately owned businesses and LLPs (new to carbon reporting):
Similarly to the FTSE companies, you will have to report energy use (to include as a minimum electricity, gas and grey fleet), with associated Scope 1 and Scope 2 greenhouse gas emissions, though this will just need to be for your UK operations, excluding any other global sites.
You will also have to include at least one intensity ratio as well as information about energy efficiency action taken in the organisation’s financial year and previous year’s figures for energy use and GHG emissions (from second year onward).
What It Means - Annual Carbon Footprint Appraisals
If your business meets the qualification criteria, you will need to assess and report your carbon footprint on an annual basis. If you have been assessing your carbon footprint on a voluntary basis and/or completing ESOS assessments, you will find the SECR process to be quite familiar, as it uses a similar dataset.
Carbon Footprint Ltd is assisting many businesses to meet their SECR compliance needs by consultant led Carbon Footprint Appraisal and Verification services and also Sustrax - Carbon Tracking software. Regular assessment and management of company carbon footprints frequently helps to reduce energy use and brings operational cost savings to a business. .
Contact Us to discuss your SECR compliance