In today’s business world, companies are being pressured to adopt sustainable measures that reduce carbon footprints and the impact on the environment. The Streamlined Energy and Carbon Reporting (SECR) framework has been implemented by the UK government to encourage businesses to adopt sustainable policies. The SECR framework officially came into effect on April 1, 2019, and aims to reduce the administrative burden of overlapping carbon reporting by simplifying processes. In this blog post, we will delve into what SECR is, who needs to comply, why it has been implemented, what companies need to report, when and how to report, and an example of a SECR reporting framework.
What is SECR?
SECR stands for Streamlined Energy and Carbon Reporting. It is a new reporting framework that was introduced by the UK government to replace the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) and extend carbon reporting to a wider range of businesses in the UK. This change was initiated due to concerns of administrative burden, lack of transparency, and complexity.
Who needs to comply with SECR?
Almost all large businesses and limited liability partnerships in the UK are required to comply with SECR. Large businesses are classified as those that have:
- More than 250 employees
- A turnover of more than £36m
- A balance sheet exceeding £18m in value
LLPs that meet the above criteria must also comply with SECR requirements. In addition, unquoted companies and their subsidiaries that meet two or more of the above conditions will also be required to comply.
Why has SECR been implemented?
SECR has been implemented to drive greater carbon awareness by making it easier for companies to measure and report their carbon emissions. The reporting framework will also help companies to identify areas of energy inefficiency, thus encouraging them to adopt energy-efficient measures and reduce their carbon footprint. By increasing transparency and encouraging businesses to adopt sustainable practices, the UK government hopes to achieve its climate change goal of net-zero emissions by 2050.
Who needs to comply with the SECR framework?
As mentioned earlier, large businesses, LLPs, and unquoted companies that fulfill two or more of the conditions mentioned earlier must comply with the SECR reporting framework. However, it is worth noting that not all reporting companies are required to report on all aspects of SECR.
When can a company be exempt from reporting?
Companies that are not legally required to comply with SECR include:
- Unincorporated businesses and sole traders
- Organisations that consume less than 40,000 kWh of energy over the financial year
- Companies that emit less than 1,500 tCO2e/year
What will companies need to report?
The SECR reporting framework has three main components:
- Energy consumption
- Greenhouse gas emissions; and
- An intensity ratio based on their annual turnover
Companies will report on their energy consumption and GHG emissions indirectly through their accounts or annually in a report. The reporting period is usually a financial year.
Where, when, and how will companies need to report?
Companies will need to include their SECR report within their annual report or financial statements. The report must be made available on their website and maintained for at least three years. According to the SECR reporting guidelines, the scope of reporting includes business operations within the UK, data for which is required to cover the whole year.
An example of a SECR Reporting framework.
A typical SECR reporting framework may include:
- An introduction to the report
- A description of business operations
- Energy consumption measurement methodology
- Details of GHG emissions and intensity ratio
- Explanation of the rationale for sustainability measures
- Compliance with any regulatory requirements or initiatives
- Discussion of the organisations approach to carbon-neutralisation
- Explanation of how the business is taking measures to reduce energy
A forward-looking sustainability outlook
The way forward
SECR is a government initiative that impacts companies in the UK and aims to promote corporate responsibility and sustainability. Companies must comply with the SECR framework if they meet the qualifying criteria. Organisations that are exempt from the reporting include sole traders and unincorporated businesses or companies that consume less than 40,000 kWh of energy over the financial year or emit less than 1,500 tCO2e/year.
By adopting the SECR reporting framework, companies can take measures to reduce their carbon footprint, identify energy inefficiencies and promote the UK government's net-zero emissions target. Adopting sustainable business practices is not only important for building a sustainable future but also benefits businesses by reducing energy costs and improving the bottom line.
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