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SECR 101: What’s good to know?

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A succinct overview of the SECR, an impactful reporting policy in the United Kingdom. 

Streamlined Energy and Carbon Reporting (SECR) is a mandatory reporting policy that requires some companies in the UK to report their energy use and associated greenhouse gas emissions and other related performance measures in the Director’s Report as part of annual filings (LLPs are required to prepare an equivalent Energy and Carbon Report).

It also asks companies to report on the energy efficiency measures they are taking, and disclose the intensity of their emissions. It encourages organizations to address climate-related risks and opportunities and improve transparency for investors and other stakeholders.

When did SECR take effect?

SECR came into effect on April 1, 2019. It extends the Mandatory Greenhouse Gas (MGHG) requirements for publicly listed companies.

What is SECR’s objective?

SECR is designed to improve transparency around energy and carbon use among public and large private companies and LLPs. For publicly listed companies, the SECR reaffirms existing requirements to disclose on scope 1 and scope 2 emissions and intensity ratio but also introduces new requirements to report on total global energy use and disclose energy efficiency measures

SECR aims to encourage and support the adoption of energy efficiency measures, helping individual organizations reduce their carbon footprint and the cost of their energy use, and impact positively on climate change. This transparency benefits all stakeholders, including investors and consumers.

Who does SECR apply to?

SECR applies to companies in the UK that are either:

  • Publicly listed companies 
  • Large private companies, or 
  • Limited liability partnerships (LLPs)

Under the SECR, LLPs and large private companies are those that meet at least two of the three following criteria:

  • 250+ employees
  • £36M+ revenues
  • £18M+ assets

The new regulations will require anestimated 11,900 companies incorporated in the UK to disclose their energy and carbon emissions.

Who is exempt from SECR reporting?

Public sector organizations are exempt from SECR regulations but are still required to complete carbon reporting under other legislations. 

Organizations (including large companies and LLPs) using less than 40,000 kWh per annum qualify as low energy users and aren’t required to report under SECR. To comply with SECR, these companies will simply need to provide a statement confirming their low energy usage.

Charities, not-for-profit companies and other organizations undertaking public activities should check to see if they meet the qualifying criteria. If they do, they are obligated to report on their emissions and energy data. Even if your company or organization falls outside of the scope of SECR regulations, voluntarily reporting on your energy and carbon is encouraged.

What do companies need to disclose to comply with SECR?

SECR builds on existing requirements that companies faced prior to April 1st, 2019, such as mandatory greenhouse gas (GHG) reporting for publicly listed companies, the Energy Saving Opportunity Scheme (ESOS), Climate Change Agreements (CCA) Scheme, and the EU Emissions Trading Scheme (ETS).

There are substantial differences in reporting requirements for different types of companies:

Publicly listed companies need to report on:

  • All operational scope 1 and scope 2 emissions sources in the UK and abroad
  • Global energy use

Large private companies and LLPs need to report on:

  • Some but not all scope 1 and scope 2 emissions sources (UK only)
  • UK-only energy use

At the same time, all companies need to report on:

  • Energy use: Electricity consumption, gas combustion, transport (excluding Scope 3 transport, although companies can elect to include this).
  • GHG emissions: Annual gross quantity of GHG emissions associated with energy use (CO2 equivalent).
  • Emissions intensity ratio: At least one metric that demonstrates annual emissions in relation to a quantifiable business metric, such as tons of CO2 per revenues or floor space.
  • Comparison: Equivalent figures from the previous year, for comparison.
  • Actions: A summary of actions taken to improve energy efficiency.
  • Methodology: An explanation of how emissions were calculated.

Disclosures should be provided for the financial year, unless companies can provide an explanation as to why the reporting period deviates from the financial year. The SECR also includes a ‘comply or explain’ clause, under which companies may exclude carbon and energy information on the basis that their disclosure would be seriously prejudicial to the interests of the organization, or the data are not practical to obtain. If this is the case, companies need to include a statement about what information is missing, and why.

Going beyond mandatory reporting requirements

Companies can go beyond mandatory reporting requirements by:

  • Voluntarily including all material sources of energy use or GHG emissions outside these boundaries
  • Reporting on Scope 3 emissions
  • Using forward-looking science-based targets on emissions
  • Adopting the reporting recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)
  • Seeking external assurance of their disclosures to guarantee accuracy, completeness, and consistency

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