Streamlined Energy & Carbon Reporting (SECR)

SECR is a mandatory reporting obligation for large UK companies, LLPs, and PLCs. It requires businesses to report on their energy consumption, greenhouse gas emissions, and energy efficiency measures. Qualifying criteria for this include:

• Your company is incorporated in the UK
• It meets two of the following criteria in the financial year: annual turnover of £36 million or more, a balance sheet total of £18 million or more, or 250 or more employees.
Companies that meet the government’s defined criteria now have to report on carbon emission and energy use. This has to be published as part of statutory accounts, in effect, making energy consumption and steps being taken to reduce carbon emissions from energy publicly available.

We can help you meet this mandatory obligation and help you to identify opportunities to reduce emissions and costs in the process.

Who Needs to Report & Penalties:

SECR is now in force & covers financial reporting years starting on or after 1 April 2019. It replaces Mandatory Greenhouse Gas Reporting (MGHG). First reports will be published in 2020 – i.e. for financial years starting on or after 1st April 2019.

If you qualify, you will need to report UK energy use and associated greenhouse gas emissions relating to gas, electricity and transport, as well as an intensity ratio, information relating to energy efficiency action, within your annual reports. This is only mandatory to include subsidiaries if they qualify for SECR themselves (note – this different to ESOS where all members of a group structure apply if at least one qualifies).

If you meet the qualification conditions but consume less than 40MWh, then there is no requirement for detailed disclosure. All companies that meet the qualification criteria must comply or explain rationale (as in MGHG).

SECR will be enforced by The Conduct Committee of the Financial Reporting Council – penalties for non-compliance have yet to be published, though if these are anything like those of ESOS or the CRC they will be substantial (fines of £40,000 plus have been issued).  

What needs to be reported?

UK (and UK offshore) energy use and related Scope 1 & 2 Greenhouse Gas (GHG) emissions.

Scope 1 – Direct emissions

• Fuel use from transport (where the journey begins or ends in the UK)
• Combustion of natural gas

Scope 2 – Indirect emissions

• Electricity purchased and used for operations (not including energy sold on)

Scope 3 – Other indirect emissions

• Energy use and related emissions from business travel in rental cars or employee owned vehicles where the company is responsible for purchasing the fuel

Intensity metric for year-on-year

• E.g. Tonnes of CO2e per FTE

Supporting narrative

• Methodologies used within the calculation
• Energy efficiency action taken in the year

Voluntary disclosures

• Wider scope 1 emissions – including other fuel use, refrigerants & manufacturing emissions
• Scope 3 emissions – upstream and downstream energy use comparison

What you will need to do?

Compliance with the reporting requirements can be complex and confusing, especially for companies reporting for the first time. SECR reporting also presents an opportunity for private companies to monitor their environmental performance and identify areas for improvement.

How we can help you

• Assist you with defining the reporting scope, including operational control and organisation boundaries
• Review your processes, controls and data outputs to assess the accuracy and completeness of your carbon disclosures
• Recommendations on best practice in monitoring and reporting operations
• Review your reporting set up and outputs
• Provide independent assurance over your carbon reporting and disclosure in your Annual Report

What you gain

• Accurate, compliant reporting
• Accelerate delivery; efficient reporting
• Increased stakeholder trust and confidence

Who needs to comply with ESOS Phase 3?

ESOS is mandatory for large companies. A large business is identified as having more than 250 employees in the UK, or it may have fewer than 250 employees but has an annual turnover of over £42.5m and a balance sheet exceeding £36.5m. 

It’s also worth stating that a smaller business also needs to comply if it is part of a corporate group containing a large enterprise.

If your business doesn’t meet the ESOS criteria, you are not legally obligated to participate in the scheme. However, it is still worth considering energy efficiency measures as they can provide benefits to your business, including financial and environmental benefits. 

ESOS Phase 3 deadlines:

We are now in Stage 3 or Phase 3 of ESOS and are approaching the qualification date, (31 December 2022) so it is key that businesses who qualify are preparing now. As part of Phase 3 of the scheme, the financial thresholds have been reduced leading to more companies qualifying and needing to act.

The scheme runs in phases of 4 years. Each phase or stage has a qualification date (on which a company must assess whether they qualify) and a compliance deadline (by which date an organisation must be compliant).

Key dates for Phase 3:

• Runs from 6 December 2019 until the 5th of June 2024.
• The qualification deadline date is the 31st of December 2022
• The compliance deadline date is the 5th of June 2024.

What do you need to do?

ESOS works on a four-year cycle, with the qualification date for Phase 3 being the 31st December 2022. If you qualify as a large company on this date, you will need to prepare and submit your ESOS report by the 5th June 2024 (previously 5th December 2023).

Before you can submit your ESOS report, you will need to complete the following:

• Gather 12 months of relevant energy and production data to help support the ESOS audit – The 12 months of data must include the qualification date, which is 31st December 2022. 
• Conduct an energy site audit – depending on how many sites you have you may need to conduct more than one audit. 
• From the audit you will need to have identified ways to improve the energy efficiency of your business.
• The next step is to create your ESOS report that evidences your findings, and provides information on the next steps, which includes timescales.

After completing these steps, you can publish your ESOS report by the due date and notify the Environment Agency (EA) that you have complied (ESOS is regulated by the EA).

The whole ESOS submission process can take 8 to 12 weeks to complete, this timescale depends on how many sites need to be audited. It’s also important to keep in mind that the longer you wait, the more difficult it will become to find a qualified lead assessor, and what we have seen with previous deadlines, the longer you leave it, the more expensive it is to submit it on time.

So if you’ve yet to start your submission, now is the time to start thinking about what you need to do, as the June 2024 deadline will be here before you know it. 

Don’t risk penalties for ESOS Phase 3. What happens if you don’t comply?

If you are an eligible company and you do not meet the ESOS criteria, then you risk being penalised by the EA. Your company will also be named publicly as part of the name and shame process. The EA also has the power to impose penalties for each separate breach of the ESOS regulations. These breaches include:

Failure to notify – initial penalty up to £5,000 plus an additional daily penalty of up to £500 for each working day remaining in breach.

Failure to maintain records – initial penalty of up to £5,000 plus a ‘sum representing the cost to the compliance body of confirming that the responsible undertaking has complied with the scheme’. You’ll also need to take steps to solve the breach.

Failure to undertake an energy audit – initial penalty of up to £50,000 plus an additional daily penalty of up to £500 for each working day remaining in breach.

Failure to comply with an enforcement/penalty notice – an initial penalty of up to £5,000 plus an additional £500 for each working day remaining in breach.

False or misleading statement – up to £50,000 penalty.

As you can see, these penalties are substantial sums of money, and once fined, you still need to comply with ESOS or the costs will only increase further.

We can help you meet this mandatory obligation and help you to identify opportunities to reduce emissions and costs in the process.

Climate Change Agreement (CCA)

CCA is a voluntary reporting obligation that offers energy-intensive UK industries a discount on their electricity bills in exchange for reducing their carbon emissions. Qualifying criteria for CCA include:

• Your company operates in one of the eligible industries
• It has made a commitment to reduce carbon emissions by signing up to a CCA with the UK government

Mandatory Net Zero Plan

The Mandatory Net Zero Plan is a reporting obligation that requires UK businesses to produce a detailed plan outlining how they will achieve net-zero carbon emissions by 2050. Qualifying criteria for this reporting obligation include:

• Financial institutions, including asset managers, regulated asset owners, or
• Public listed companies

Task Force on Climate-Related Financial Disclosures (TFCD)

TFCD is a voluntary reporting obligation that requires companies to disclose their climate-related risks and opportunities in their annual reports. Qualifying criteria for TCFD include:

• PLC with 500 employees, or,
• Private companies with 500 employees and £500m turnover

UK Emissions Trading Scheme (UK ETS)

The UK ETS is a mandatory reporting obligation that requires participants to report on their carbon emissions and purchase allowances for their emissions. Qualifying criteria for this scheme include:

• Your company operates in one of the sectors covered by the UK ETS
• A business’s carbon costs are 5% or more of its GVA
• Other qualifying businesses include aviation and installations