Streamlined Energy and Carbon Reporting (SECR)
SECR was introduced in 2019 to replace the older CRC Energy Efficiency Scheme and Mandatory Greenhouse Gas Reporting (MGHG). SECR requires all large UK companies to report their carbon emissions, energy usage and steps taken to reduce emissions on an annual basis. The intention was to streamline carbon reporting and bring it into line with financial reporting.
As well as giving organisations a clearer picture of their energy use and emissions, incentivising carbon reduction, SECR is also intended to be a reputational driver. Reports are publicly available, allowing increased transparency for investors and other stakeholders.
SECR came into force on April 1st 2019, with the first reports published in 2020. Compliance is based on an organisation’s financial reporting year. A company or LLP meets the qualifying conditions if it satisfies two of the following criteria:
- Turnover of £36 million or more
- Balance sheet total of £18 million or more
- 250 or more employees in the UK
Organisations that qualify must report UK energy use and associated greenhouse gas emissions relating to their gas, electricity, and transport, as well as intensity ratio and information relating to energy efficiency action, within their annual reports.
An intensity ratio is a way of defining emissions data in relation to an appropriate business metric, such as tonnes of CO2e per sales revenue or per total metres of floor space, allowing better comparison of energy efficiency performance over time and against similar organisations. Organisations are free to choose their own metric, but it should be an appropriate reflection of their activities and remain consistent.
Quoted companies must report their Global Scope 1 & Scope 2 emissions, as well as their global energy use for the current reporting year. Scope 3 reporting is voluntary but strongly recommended.
Scope 1 – Direct emissions from owned or controlled sources
Scope 2 – Indirect emissions from the generation of purchased energy
Scope 3 – All other indirect emissions that occur in a company’s value chain
Unquoted companies and LLPs must report, at minimum, UK energy use from electricity, gas and transport, including at least one intensity ratio.
Reporting must include a narrative of measures taken to improve energy efficiency in the period of the report. If no measures have been taken, this should be stated. A ‘comply or explain’ clause means that organisations must include an explanatory statement for any data that is omitted.
Organisations that meet the qualification conditions but consume less that 40MWh are not required to make a detailed disclosure, but must still include a statement in their report confirming they are a low energy user.
While the exact amount for fines for failure to comply have not yet been confirmed, they are expected to be in line with those for ESOS non-compliance. In extreme circumstances, punitive measures could include prison sentences for directors.