SECR, which stands for Streamlined Energy and Carbon Reporting, is a sustainability reporting framework that applies to large organisations in the UK.
In today's world, the need for organisations to take responsibility for their environmental impact is more crucial than ever. One of the key frameworks that promote sustainability and transparency is Streamlined Energy and Carbon Reporting (SECR). This mandatory reporting framework, introduced in the United Kingdom (UK), goes beyond measuring greenhouse gas emissions and focuses on energy efficiency improvements. In this article, we will provide SECR reporting guidance, what SECR is, who needs to report, what should be included in the reporting, and the future of the SECR framework.
What is SECR Reporting?
SECR, which stands for Streamlined Energy and Carbon Reporting, is a sustainability reporting framework that applies to large organisations in the UK. It aims to promote transparency and encourage cost savings and emission reductions. SECR goes beyond measuring greenhouse gas emissions and requires organisations to provide a narrative explanation of their efforts, methodology for data measurement, and intensity ratios for comparing emissions data with their business metrics or financial indicators. By contextualising an organisation's emissions, SECR provides stakeholders with a comprehensive understanding of an organisation's energy and carbon use.
Who Does SECR Affect?
SECR applies to quoted companies, large unquoted companies, and large LLPs.
‘Large’ is defined by the Companies Act as having at least two of the following:
- A turnover of £36 million or more.
- A balance sheet total of £18 million or more.
- 250 employees or more.
When was SECR Introduced?
The SECR policy was implemented on April 1, 2019, replacing the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. The introduction of SECR aligned with the recommendations of the G20 Financial Stability Board's Taskforce on Climate-related Financial Disclosures. This framework aims to support organisations in making sustainability improvements while providing valuable information for investors and stakeholders.
Is SECR Mandatory?
SECR is a mandatory annual reporting requirement for over 11,900 organisations across the UK. Quoted companies, large unquoted companies incorporated in the UK, and large Limited Liability Partnerships (LLPs) are required to comply with SECR. The Companies Act 2006 defines "large" companies based on turnover, balance sheet, and employee count. However, organisations that use a low level of energy (40MWh or less over the reporting period) are exempt from SECR reporting. Public sector organisations and those undertaking public activities are also not required to submit SECR reporting, although voluntary participation is encouraged to support transparent ESG reporting.
How to Calculate and Report to SECR?
SECR reporting requirements differ depending on the type of organisation and their reporting boundary. At a minimum, organisations need to report on energy use, including gas, purchased electricity, and transport fuels directly procured by the reporting company(If you rent a car and purchase petrol/diesel, you need to report this, but if you travel by train/bus, you don't need to report it), along with greenhouse gas emissions. For quoted companies, fugitive emissions should be reported. Methodology for measuring energy use and emissions, a narrative description of efforts to improve energy efficiency, intensity ratio for comparison, and equivalent figures from previous years should also be included. While reporting on Scope 3 emissions, which relate to the supply chain, is not currently mandatory, organisations are encouraged to include it for a more accurate assessment of their impact.
SECR disclosures should be easily accessible and understood by stakeholders. The information needs to be included in a company's 'Directors' Report,' 'Strategic Report,' or equivalent, each financial year. To ensure robustness of the reporting process, organisations should utilise the services of sustainability consultants or other relevant software to consolidate emissions, energy information and track targets in an auditable platform.
The Future of the SECR Framework
The SECR framework is still relatively new, but it has already had a significant impact on organisations' approach to environmental reporting. The UK government has taken further steps to encourage emissions reporting and reductions, such as introducing a transportation decarbonisation plan and making electric vehicle charging points mandatory in new homes and buildings. It is likely that Scope 3 emission reporting will become an integral part of SECR in the future. Additionally, the focus of SECR may shift towards setting targets to support the government's decarbonisation and sustainability goals.
The Bottom Line
Streamlined Energy and Carbon Reporting (SECR) is a crucial framework for promoting sustainability and transparency in large organisations in the UK. By requiring organisations to report on energy use, emissions, and efforts to improve energy efficiency, SECR provides stakeholders with valuable information to make data-informed decisions and drive positive change. As the world faces the global urgency of carbon reduction, SECR plays a vital role in encouraging organisations to take responsibility for their environmental impact and work towards achieving net-zero carbon emissions.