SECR: The Complete Guide

SECR requires organisations to disclose energy use and carbon emissions information in their annual reports.

In the United Kingdom, the main legislation that dominates the carbon reporting landscape is the Streamlined Energy and Carbon Reporting (SECR) policy. This article aims to provide a comprehensive overview of SECR, including what it is, who needs to comply with it, how to comply with it, and answers frequently asked questions.

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What is SECR?

The UK's Streamlined Energy and Carbon Reporting (SECR) policy was implemented on April 1st, 2019, through the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. SECR requires organisations to disclose energy use and carbon emissions information in their annual reports. While SECR builds on existing reporting requirements, its primary goal is to expand the scope of energy and carbon reporting to a larger number of companies and drive energy efficiency actions.

Who needs to comply with SECR?

SECR applies to three groups of businesses:

1. Quoted Companies: These are companies listed on a public exchange.
2. Large Unquoted Companies: These are unquoted companies incorporated in the UK that meet the definition of 'large' under the Companies Act 2006.
3. Large Limited Liability Partnerships (LLPs): Large LLPs, as defined by the Companies Act 2006, are also required to comply with SECR.

To be considered 'large,' companies and LLPs must meet at least two of the following criteria in a reporting year:

Turnover of £36 million or more

Balance sheet of £18 million or more

250 employees or more

It is worth noting that public bodies are not subject to SECR, but they are governed by other legislation that mandates carbon reporting. Additionally, private sector organisations outside the scope of SECR are encouraged to voluntarily report in a similar manner.

Compliance and Reporting Requirements

Quoted Companies

Quoted companies must adhere to the following reporting requirements under SECR:

• Global scope 1 and 2 greenhouse gas (GHG) emissions must be reported, while reporting scope 3 emissions is voluntary but strongly recommended.
• At least one emissions intensity ratio must be provided, allowing for comparability between emissions data and an appropriate business metric or financial indicator.
• Underlying global energy use for the current reporting year should be disclosed.
• Figures for energy use and GHG emissions from the previous year must be included.
• Energy efficiency actions taken during the relevant financial year should be described, accompanied by a narrative description.
• The methodology used for reporting should be disclosed, with a recommendation to use widely recognised independent standards such as the GHG Reporting Protocol (Corporate Standard) or ISO 14064-1:2018.

Large Unquoted Companies and LLPs

Large unquoted companies and LLPs have the following reporting requirements under SECR:

• UK energy use and associated GHG emissions must be reported.
• Figures for energy use and GHG emissions from the previous year should be provided.
• At least one intensity ratio should be reported.
• Energy efficiency actions taken during the relevant financial year should be described, accompanied by a narrative description.
• The methodology used for reporting should be disclosed.

Understanding the "Comply or Explain" Clause

SECR includes a "comply or explain" clause, allowing companies to omit information if it is not feasible to collect or disclose it. In such cases, companies must provide a clear explanation of what information has been excluded and why. However, omitting information is discouraged, and steps should be taken to fill any material gaps in the future.

Exemptions to Reporting

Companies and LLPs that can demonstrate low energy use - 40 MWh or less over the reporting period - are exempt from SECR reporting. However, they must include a statement in their report confirming their status as a low energy user.

Compliance Deadlines

SECR reporting requirements apply to financial years starting on or after April 1st, 2019. Companies need to provide SECR-accordant information in their Director's Report or equivalent for each financial year thereafter.

How to Comply with SECR

Compliance with SECR requires thorough data collection, accurate reporting, and disclosure of energy use and carbon emissions information. To ensure SECR compliance, organisations can follow these steps:

1. Determine if your company falls within the scope of SECR based on the criteria mentioned earlier.
2. Collect data on energy use and associated GHG emissions, including figures from the previous year.
3. Calculate intensity ratios by comparing emissions data with relevant business metrics or financial indicators.
4. Document energy efficiency actions taken during the reporting year, providing a narrative description.
5. Disclose the methodology used for reporting, using recognised standards where possible.
6. Include SECR-accordant information in your Director's Report or equivalent for each financial year starting on or after April 1st, 2019.
7. Consider voluntary reporting of additional material sources of energy use or GHG emissions, as well as scope 3 emissions.
8. Optionally, seek external verification or assurance to ensure the accuracy, completeness, and consistency of your data.

Frequently Asked Questions

The Bottom Line

As the UK makes strides towards a sustainable, low carbon economy, the Streamlined Energy and Carbon Reporting (SECR) policy plays a pivotal role in expanding energy and carbon reporting requirements. By mandating disclosures and encouraging energy efficiency actions, SECR aims to drive positive change, reduce carbon emissions, and help businesses navigate the transition to a sustainable future. Compliance with SECR is crucial for companies falling within its scope, and by following the reporting requirements and guidelines, organisations can contribute to a more sustainable future for business, the world, and our future.