Ensure your energy efficiency projects and carbon emissions are reportable and audit ready
SECR stands for Streamlined Energy and Carbon Reporting. It is legislation put out by Ofgem to ensure that businesses of a certain size are reporting their carbon footprint and their carbon strategy in their financial accounts.
SECR replaced the Carbon Reduction Commitment (CRC) scheme that was for a small percentage of large energy users and ended on 31 March 2019.
The CRC scheme required all qualifying organisations to report energy and carbon emissions in their annual reports. The SECR reporting legislation has been introduced to make carbon reporting more transparent as businesses work towards the government goals of net-zero carbon emissions.
SECR extends the requirements of existing carbon legislation such as Mandatory Carbon Reporting (MCR) regulations and is mandatory for all eligible organisations.
You must conduct SECR reporting if your business meets the following criteria:
If you are a large non-quoted UK Company or LLP you must report SECR if you met the following:
To qualify you must hit at least 2 of those thresholds. If you hit just one, then you’re exempt from reporting
SECR requires businesses to include their energy use (including electricity, gas and transport) emissions and an intensity metric in their annual Directors’ report for financial years beginning on or after 1 April 2019. The government will not specify the exact procedures that should be used for energy and carbon reporting, nor will they specify which intensity metrics to use. They will however create guidance on good practice. All SECR participants must provide a narrative commentary on energy efficiency action taken in the financial year.
Due to these requirements an organisations energy efficiency plans will now be in the public domain and therefore must be clear, concise and accurate to the level of energy use of that business.
Quoted companies must continue to report on scope 1 and 2 greenhouse gas emissions (direct greenhouse gas emissions from owned or controlled sources and indirect emissions generated by purchased energy). Additionally, they’ll be required to report on global energy use, where appropriate. Unquoted companies will now also be required to report scope 1 and 2 emissions. Reporting of scope 3 emissions (all indirect emissions not included in scope 2) will remain voluntary for both quoted and unquoted companies.
SECR also requires organisations to purchase carbon allowances to cover their carbon emissions. As a result, CRC charges were added to the Climate Change Levy (CCL) increasing the CCL on electricity to 0.847p/kWh, and the CCL on natural gas to 0.339p/kWh in 2019/20. Increases of 45% and 67% respectively.
Make Energy and Carbon Reporting Simpler
SECR has been designed to make energy and carbon reporting simpler, aligning with existing reporting mechanisms to reduce the burden of compliance requirements on organisations. It will also contribute to the government’s Clean Growth Strategy ambition of enabling business and industry to improve their energy productivity by at least 20% by 2030.
By completing your SECR reporting you will also:
Alex Dovey and Veronika Sanobova discuss SECR
It is the companies responsibility to be fully aware of their legal obligations to perform SECR reporting. However, the environmental agency does send out notice letters to companies that qualify. The companies of this size should not rely on this notification as they may have multiple offices and the registered office may not have any employees who are responsible for carbon compliance legalisation.
Most large companies perform SECR when they are completing their annual accounts and they typically use an auditor who raises the requirement for SECR during that audit.
However, it may not be ideal to prepare and conduct SECR during a financial audit because it can add to the existing burden of that audit. Instead you can conduct your SECR reporting earlier in the year and then you are prepared to present the report with the rest of the financial audit so it does not become too overwhelming doing both at the same time.
SECR Reporting can be done by businesses themselves or with the support of an energy consultant which brings the following advantages:
The most time-consuming element of SECR reporting is gathering all the information and data required to accurately footprint the business. With gas and electricity for buildings, if you’re using an energy consultant, it is likely that all your energy consumption data is already captured and stored in a central online repository, saving huge amounts of time.
Travel is a key factor that needs to be calculated and it presents its own challenges. For example, its common to consider the following:
All of these factors must be collected and with the appropriate conversion factors applied to it to be able to produce an accurate carbon footprint.
The goal of SECR is to accurately carbon footprint the business that covers all the scope of emissions that are in the SECR legislation, and to provide a measurement index and commentary about how to reduce the carbon footprint of that business moving forward.
By conducting an SECR audit businesses will to be paying attention to their carbon output. As the world changes and governments become under more pressure to consider sustainability, there is growing pressure on becoming net zero.
It is becoming more common during competitive bidding between businesses that more and more buyers are asking their suppliers about their corporate social responsibility, and what green credentials they have. The greener and more sustainable the business is, the better – it is now beginning to become a point where it can influence the award of new business and the income of these companies.
By making it a legal requirement for businesses that fall within the requirements to be publishing their carbon outputs, it puts that information in the public domain and is viewable in your accounts.
With this information becoming clearly visible and bringing more transparency to carbon reporting, businesses are likely to take more responsibly in trying to reduce their carbon footprint as they appease increasing external pressures, but also receive commercial benefits in demonstrating that responsibility.
Therefore, the bigger picture behind SECR is to create accountability and transparency in businesses to support the UK government’s net zero goals.
Unlike any other legislations like ESOS, where there’s a clearly defined deadline for everyone, SECR is all to do with the financial accounts, so you just have to make sure that you’re including the SECR section and report within those accounts. Therefore, the deadline is whenever you need to file your account company’s house.
The most important thing to understand about SECR is that it’s a legal requirement for businesses, don’t fall into the trap of seeing it as too much of a fully pressured audit. The reason for this legislation is to make sure the companies are conscientious of their carbon output. Being open with the environment agency, open with your partners that you’re working with, and that you seem to be completing your SECR audit with the best intentions of accuracy and punctuality then you are doing a good job.
The legislation is designed to ensure this accuracy because it’s public record information. It is important to be punctual and ensure that you are not showing the rest of the world that you’re not paying attention to supporting the reduction of carbon footprints. Do not be worried to take your time your time with your audit, and engage with your partners, and experts who have carbon footprinted businesses before because the legalization is still relatively new, and businesses are still learning to complete their audits and reports as they go. The good thing is the more audits you complete, the better you’ll get at performing them and the more context each report will gain as you improve. You can gain this quality and experience straight away by having an energy consultant supporting you with your SECR reporting.
Unlike ESOS where there is a £50,000 fine and other penalties, SECR has not clearly defined in it’s legislation that there would be a fine. However, it is heavily intimated that there would be consequences of financial nature. So far there is very little evidence in the public domain of examples of official fines being imposed for a lack of SECR reports.
However, the biggest penalty you should consider is that you would have a public record that your business is not complying with carbon legislation, and in today’s world that can cause damage to your brand, look badly on your corporate social responsibility and green credentials, and potentially hinder you when competitively bidding for business.