The UK’s new SECR carbon legislation is set to affect how large companies disclose their greenhouse gas (GHG) emissions and energy data. Find out whether your business will be affected - and what you need to do to ensure compliance.
The Streamlined Energy and Carbon Reporting (SECR) policy is a sustainability framework implemented by the UK government’s Department for Business, Energy and Industrial Strategy (BEIS).
Mandatory for large, UK-based companies, the SECR builds on existing carbon and energy reporting frameworks, extending their scope by requiring organisations to share their carbon emissions and energy use in their annual reports.
Qualifying companies will need to include SECR-aligned information in their Directors’ Report - or an equivalent Energy and Carbon Report for LLPs - for financial years beginning on, or after, 1 April 2019.
If a company’s carbon emissions or energy use are considered to be strategically important, disclosures can instead be provided in a Strategic Report. An explanation of this decision must be outlined in the Directors’ Report.
Three types of businesses are affected by the new SECR regulation:
Unquoted companies or LLPs are defined as ‘large’ if they meet at least two of the following three criteria:
LLPs and large unquoted companies are exempt from SECR reporting if they can demonstrate their energy use during the reporting period is below 40 MWh.
Public bodies are not required to comply with SECR. However, they are subject to other carbon reporting legislation. Organisations undertaking public activities - such as charities, not-for-profits and academies - will need to check whether they meet the qualifying criteria.
Private sector organizsations which fall outside this scope are encouraged to voluntarily report on their carbon emissions and energy use.
Carbon legislation has been ramping up worldwide - in the EU, the Carbon Border Adjustment Mechanism (CBAM) has been implemented and the Corporate Sustainability Reporting Directive (CSRD) affects large companies, who will need to provide more detailed reporting on sustainability issues. In the United States, the Securities and Exchange Commission (SEC) has proposed legislation requiring publicly-listed companies to disclose their carbon emissions - as well as more detailed information on climate risks.
In the UK, the SECR is the main carbon reporting framework, requiring companies to share energy use and carbon emissions information. The SECR’s aim is to create a more even playing field for energy and emissions reporting, provide greater transparency for stakeholders and increase companies’ awareness of energy costs, which should enable improvements in energy efficiency and carbon emissions reduction.
The SECR outlines one set of requirements for quoted companies, and another for LLPs and large unquoted companies.
The SECR recommends companies go beyond the minimum requirements and voluntarily include any other material source of energy use or GHG emissions outside these boundaries. External verification is encouraged as best practice, but it is not mandatory.
Although disclosing Scope 3 emissions is a voluntary process, the SECR strongly advises companies to measure and share this information, as this helps provide a more accurate picture of an organisation’s impact. Using science-based targets - and adopting recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) - is also encouraged.
The SECR also contains a ‘comply or explain’ clause, which allows organisations to exclude information when it is not practical or feasible to collect it - as long as companies can explain what information has been omitted and why. In future reporting, companies should take steps to fill in any material gaps from previous years.
Measuring your greenhouse gas (GHG) emissions is a fundamental step towards ESG leadership and carbon risk management. CarbonChain helps companies fill critical data gaps to ensure your organisation complies with the SECR. If you need help calculating your Scope 3 emissions, then get in touch today.
The SECR is compulsory for UK-based quoted companies, large unquoted companies and large LLPs unless they meet certain exemption criteria.Unquoted companies or LLPs are defined as ‘large’ if they meet at least two of the following three criteria: gross income of £36 million or more; balance sheet assets of £18 million or more; 250 employees or more.
Company or group reporting is required even in case where an overseas parent company or group has published a similar report. However, a group may exclude energy and carbon information relating to subsidiaries which, according to the above criteria, would not be obliged to report individually.
SECR refers to the Streamlined Energy and Carbon Reporting framework, a regulation implemented by the UK government’s Department for Business, Energy and Industrial Strategy (BEIS). Building on existing energy and carbon legislation, the SECR is mandatory for large, UK-based companies, requiring them to share carbon emissions and energy use in their annual reports.
To adhere to SECR, quoted companies, LLPs and large unquoted companies must disclose their energy efficiency improvements, at least one intensity ratio, their global energy use during the reporting year, their energy use and GHG data from the previous reporting year, as well as any methodology used in their reporting. Quoted companies must also report on their global scope 1 & 2 GHG emissions - while LLPs and large unquoted companies will only need to disclose their UK energy use and any associated GHG emissions.
The Conduct Committee of the Financial Reporting Council is responsible for monitoring compliance of company reports with the relevant reporting requirements. If the Committee feels relevant disclosures have not been adequately provided it has the power to enquire further, raising concerns with companies where there is evidence of non-compliance and - if necessary - apply to the Court for a declaration that disclosures do not comply with requirements. The Committee can also request an order requiring directors to prepare a revised set of accounts. However, the Conduct Committee operates by agreement with the businesses whose reports it reviews and - to date - it has achieved its objectives without recourse to the Court.