Streamlined Energy & Carbon Reporting (SECR)
What it is and what it means to your business
In 2019 the Carbon Reduction Commitment (CRC) scheme will end and the new SECR will be introduced.
What We Know So Far
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.
|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, we suspect that the government will enact carbon reporting on this wider scale.
But you might ask why should we not just rely on ESOS? The Energy Savings Opportunity Scheme (ESOS) stems from EU legislation and in our view is somewhat separate from SECR. Additionally, ESOS only applies to large entities 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 What
SECR guidelines take effect from 1st April 2019, and cover financial reporting years starting on, or after this date, and replaces the guidance on Mandatory Greenhouse Gas Reporting (MGHG). First reports will be published in 2020 – for those companies with FY 1st April 2019 to 31st March 2020.
The qualifying conditions are met by a company or LLP in a year in which it satisfies two or more of the following requirements:
- Turnover £36 million or more
- Balance sheet total £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).
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 To Your Business
For the time being, the government has not announced its exact plans so for the most part you could just wait until we know precisely what the changes will be. However, if your business is already doing ESOS, there is a good argument to be made for starting to assess and report your carbon footprint on an annual basis now. ESOS uses very similar datasets to a carbon footprint assessment, so whether you are assessing yourself or with consultant support, this means that converting your ESOS dataset will be easy and will save on resource time (and cost if you are going externally). Regular monitoring will also help you maximise and track your reductions whilst also preparing you for potential changes in future legislation.
Getting ready for legislation is one thing; by completing your carbon footprint assessment you will also be adopting what is best practice for many businesses that already voluntarily disclose their emissions, e.g. as part of the CDP (formally known as the Carbon Disclosure Project) and the Global Reporting Initiative. A carbon footprint is also a very useful metric to track for ISO 140001 / environmental management systems. For SMEs, check out our easy to use online carbon calculators.
Contact Us to discuss starting your carbon management