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Understanding SECR: Streamlined Energy and Carbon Reporting

In today's ever-changing world, sustainability has become a paramount concern, and companies play a crucial role in driving positive change. The UK, a frontrunner in environmental initiatives, has embraced the Streamlined Energy and Carbon Reporting (SECR) framework to propel sustainable practices across industries. This article serves as your comprehensive guide to understanding SECR and its impact on fostering a greener future in the UK.


What is SECR?


Streamlined Energy and Carbon Reporting (SECR) was introduced in the UK in April 2019 as part of the government's Clean Growth Strategy. SECR replaced the Carbon Reduction Commitment Energy Efficiency Scheme (CRC EES) and expanded the reporting requirements to include not only energy use but also carbon emissions.


SECR aims to simplify and standardize energy and carbon reporting for large UK companies while also encouraging them to improve their energy efficiency and reduce their carbon emissions. The policy requires large companies to report their energy consumption and greenhouse gas emissions annually and disclose any measures they have taken to improve energy efficiency during the reporting period.



Who needs to comply with SECR?


SECR applies to large UK companies that meet at least two of the following three criteria:

  • More than 250 employees

  • Annual turnover of more than £36 million

  • Annual balance sheet total of more than £18 million

In addition to UK quoted companies, SECR also applies to large unquoted companies and limited liability partnerships (LLPs).


While most large UK companies are required to comply with SECR, there are some exemptions:

  • Low energy users: companies that consume less than 40,000 kWh of energy per year are exempt from the energy and carbon reporting requirements of SECR. However, they may still be required to comply with the energy efficiency actions reporting requirement.

  • Organizations operating as charities, not-for-profit companies, or engaged in public activities should assess whether they meet the qualifying criteria mentioned above.


What are the potential fines and penalties for non-compliance with SECR?


The Conduct Committee of the Financial Reporting Council (FRC) is responsible for enforcing SECR. The FRC can impose fines for non-compliance.


If the company do not provide adequate information, Companies House can reject them. This could lead to SECR fines in the form of late deadline penalties when companies’s accounts are resubmitted. Late filing penalties range from £150 up to £7,500 depending on the type of company and how late the accounts are submitted.


The Conduct Committee of the Financial Reporting Council (FRC) can impose civil penalties of up to £50,000 for non-compliance with SECR. The FRC can also issue a public censure, which is a serious warning that can damage a company's reputation.



What are the reporting requirements for SECR?


The reporting requirements for SECR are designed to provide companies with a streamlined and standardized approach to reporting their energy use and carbon emissions.


Quoted companies must include:

  • Scope 1 (direct emissions from company-owned and controlled resources) and Scope 2 (indirect emissions from the generation of purchased energy) are mandatory. Reporting Scope 3 emissions is voluntary but highly recommended.

  • At least one emissions intensity ratio should be provided, which compares emissions data with a relevant business metric or financial indicator like sales revenue or floor space, facilitating comparability.

  • Disclose the global energy use for the current reporting year.

  • Previous year's figures for energy use and GHG emissions must be included for comparison.

  • Energy efficiency actions and measures taken during the relevant financial year.

  • Methodologies used in calculation of disclosures. It is advisable to employ a widely recognized independent standard, such as the GHG Protocol, International or Organisation for Standardization (ISO 14064-1:2018).


Large unquoted companies / Large LLPs must include:

  • UK energy use (as a minimum gas, electricity and transport, including UK offshore area)

  • Associated greenhouse gas emissions

  • At least one emissions intensity ratio.

  • Previous year's figures for energy use and GHG emissions must be included for comparison.

  • Energy efficiency actions and measures taken during the relevant financial year.

  • Methodologies used in calculation of disclosures


It's important for companies to ensure that their SECR report is accurate and complete, as failure to comply with the reporting requirements can result in fines and reputational damage.



What are the benefits of SECR?


Streamlined Energy and Carbon Reporting (SECR) offers several benefits to UK companies, including:


Improved energy efficiency and reduced carbon emissions.


SECR requires companies to report their energy consumption and greenhouse gas emissions. This can help companies to identify areas where they can improve their energy efficiency and reduce their emissions.


Cost savings


By improving their energy efficiency, companies can save money on their energy bills and reduce their operating costs. SECR reporting can also help companies identify opportunities for cost savings through the implementation of energy-saving measures.


Enhanced corporate reputation


SECR can help companies to improve their corporate reputation by demonstrating their commitment to sustainability. This can be a valuable asset in attracting customers, investors, and employees.


Increased transparency and accountability


SECR makes it easier for investors, customers, and other stakeholders to understand the environmental impact of companies. This can help to increase transparency and accountability, which can be beneficial for all parties involved.


Better risk management


SECR reporting can help companies identify and manage risks associated with energy use and carbon emissions. By understanding their energy consumption and carbon footprint, companies can make more informed decisions about energy-related risks and opportunities.



Conclusion: SECR as an opportunity for companies


In conclusion, while the Streamlined Energy and Carbon Reporting (SECR) policy may seem like another regulatory burden for companies, it actually presents an opportunity for them to improve their energy efficiency and reduce their carbon footprint. SECR provides a framework for companies to measure and report their energy use and carbon emissions, which can lead to cost savings, improved efficiency, and enhanced reputation. By encouraging companies to reduce their carbon footprint and transition to a low-carbon economy, SECR supports the UK's climate change goals and contributes to a more sustainable future.


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