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What is SECR? Streamlined Energy and Carbon Reporting Explained

SECR Reporting

The Streamlined Energy and Carbon Reporting (SECR) framework is a crucial initiative introduced by the U.K. government to enhance corporate accountability and transparency in energy usage and carbon emissions. By requiring rigorous reporting from various organizations, SECR seeks to combat climate change and drive energy efficiency across the nation. Businesses are mandated to report their energy consumption, greenhouse gas emissions, and the measures taken to improve efficiency. Compliance with SECR can be achieved through robust data collection systems, regular energy audits, and engagement with energy management experts. These efforts collectively contribute to a sustainable and environmentally responsible business landscape.

Who Needs to Report under SECR?

The Streamlined Energy and Carbon Reporting (SECR) framework applies to a variety of organizations across the United Kingdom, necessitating rigorous reporting of energy consumption and carbon emissions. The categories of organizations mandated to report under SECR include but are not limited to:

  • Quoted Companies: These are companies referenced on the official list, the AIM on the London Stock Exchange, or any other EU-regulated market. Quoted companies must disclose global energy use, greenhouse gas emissions, and an intensity ratio in their annual report.
  • Large Unquoted Companies: Unquoted companies incorporated in the U.K. that meet two or more of the following criteria must comply with SECR:
    • An annual turnover of £36 million or more
    • A balance sheet total of £18 million or more
    • 250 employees or more

These companies need to capture their energy use and associated emissions, along with at least one intensity metric.

  • Large Limited Liability Partnerships (LLPs):LLPs are also within SECR’s remit if they fulfil the criteria applied to unquoted companies. These entities must disclose the total energy consumption, emissions, and a comparative intensity ratio, amongst other details, in the annual reports.

It is essential to note certain exemptions and exclusions:

  • Low Energy Users: Organizations consuming 40,000 kWh or less over the reporting period are exempt but must disclose this status in their annual report.
  • Special Cases: Charitable organizations and those engaged in public activities not for profit may have different reporting obligations or be exempt.
  • Non-Standard Financial Year: There are accommodations for organizations with different financial year-ends not aligning with the standard reporting periods.

Additionally, subsidiaries may be excluded from SECR reporting if they are captured within their parent company’s consolidated disclosures, providing a mechanism to avoid duplicate reporting responsibilities.

Ensuring compliance with SECR requires organizations to maintain accurate data collection processes and undertake periodic energy audits, often necessitated by the Energy Savings Opportunity Scheme (ESOS). Reporting entities must provide narrative disclosures on measures taken throughout the financial year to improve energy efficiency. Whether through upgrading equipment, optimizing operations, or adopting new technologies, these disclosures are essential in demonstrating proactive energy management and contributing to national carbon reduction goals.

Why Was SECR Introduced?

The Streamlined Energy and Carbon Reporting (SECR) framework was introduced by the U.K. government for multiple compelling reasons, each aimed at advancing environmental sustainability and energy efficiency across the nation. Some of the primary motivations include:

  • Combat Climate Change: One of the foremost reasons for SECR’s introduction is to combat climate change by systematically reducing greenhouse gas emissions. The framework supports the U.K.’s commitment to international agreements such as the Paris Agreement, aiming to limit global temperature rise.
  • Enhance Transparency: SECR aims to enhance corporate transparency regarding energy use and carbon emissions. By mandating consistent and standardized reporting practices, stakeholders, including investors, customers, and the public, gain clearer insights into a company’s environmental impact and sustainability efforts.
  • Drive Energy Efficiency: The framework incentivizes businesses to adopt more energy-efficient practices by making energy consumption and emission reductions a requisite for compliance. This, in turn, is anticipated to lead to cost savings, making businesses more competitive.
  • Policy Alignment: SECR aligns with other U.K. policies and initiatives focused on energy and environmental sustainability, including the Energy Savings Opportunity Scheme (ESOS) and the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. By streamlining several reporting requirements, SECR aims to reduce the administrative burden on organizations.
  • Promote Accountability: The introduction of SECR promotes corporate accountability in environmental stewardship. Businesses are required to not only report their energy use and emissions but also elaborate on measures undertaken to improve performance, fostering a culture of continuous improvement.
  • Support National Goals: Implementing SECR is a strategic move to support national goals of reducing carbon emissions by 2050. By setting clear reporting standards, the U.K. government can better track progress towards meeting its climate targets and make data-driven policy decisions.
  • Encourage Innovation: By focusing on energy usage and carbon emissions, SECR prompts businesses to innovate in how they manage and reduce their environmental footprint. This could lead to the development of new technologies and practices that benefit the broader economy.

Overall, the SECR framework serves as a crucial instrument for driving environmental responsibility and sustainable business practices throughout the U.K. It endeavours to create a transparent, accountable, and collaborative approach towards energy management, directly contributing to the global effort to mitigate climate change.

What Are SECR Reporting Requirements?

The Streamlined Energy and Carbon Reporting (SECR) framework outlines specific reporting requirements that organizations must adhere to in their annual reports. These requirements aim to ensure transparency, consistency, and thoroughness in how energy use and carbon emissions are documented. The reporting requirements include the following key elements:

  • Energy Consumption: Organizations must provide detailed information on their energy use, covering electricity, gas, and transport fuel consumption. The data should include both direct and indirect energy usage at the global level for quoted companies, and U.K.-only consumption for unquoted companies and LLPs.
  • Greenhouse Gas Emissions: Businesses are required to report greenhouse gas emissions in line with the Greenhouse Gas Protocol or other relevant standards. This includes carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and other significant greenhouse gases. Both Scope 1 (direct) and Scope 2 (indirect) emissions need to be disclosed.
  • Intensity Ratio: An intensity ratio must be calculated and reported, which expresses the emissions data in relation to a quantifiable factor specific to the organization, such as revenue, number of employees, or other relevant metrics. This allows for a comparative analysis of energy efficiency over time.
  • Methodology: The methodology used to calculate energy consumption and emissions must be clearly outlined. This should include any specific approaches, measurement techniques, and conversion factors employed, ensuring transparency and allowing for the replication of results.
  • Narrative on Energy Efficiency Measures: A qualitative description outlining the principal energy efficiency measures undertaken during the reporting period is mandatory. This should detail actions such as upgrades to lighting, HVAC systems, or other significant energy-saving initiatives, and the impact they have had on reducing energy use and emissions.
  • Comparative Data: Companies must provide comparative data for previous years where available. This enables stakeholders to assess trends in energy consumption and emissions, fostering an understanding of an organization’s progress in sustainability efforts.
  • Board Approval: The SECR report must be approved by the board of directors and signed off by a director for quoted companies. This emphasizes the accountability and governance associated with SECR reporting.

Exemptions are in place for low energy users who consume 40,000 kWh or less per year, still requiring a statement regarding their exempt status. Additionally, subsidiaries may be excluded if their data is part of the parent company’s consolidated report. Meeting these requirements not only ensures compliance but also aids businesses in identifying opportunities for improved energy management and cost reductions, contributing to broader environmental and economic benefits.

How Can Businesses Improve SECR Reporting and Compliance?

To improve SECR reporting and compliance, businesses can adopt several best practices and strategies, ensuring accuracy, efficiency, and adherence to regulatory requirements. Key steps include:

  • Implement Robust Data Collection Systems: Establishing comprehensive and automated data collection systems to track energy consumption and emissions is crucial. This can involve integrating energy meters, sensors, and specialized software that provide real-time data and reduce the risk of manual entry errors.
  • Conduct Regular Energy Audits: Regular energy audits can help businesses identify inefficiencies and areas for improvement within their operations. Auditors can provide actionable insights and recommend energy-saving measures that enhance overall performance and compliance.
  • Engage with Energy Management Experts: Collaborating with energy management consultants or hiring in-house experts can provide the needed expertise to navigate SECR requirements. These professionals can offer tailored advice, ensuring accurate reporting and implementation of effective energy reduction strategies.
  • Training and Awareness: Providing training programs for staff on the importance of energy efficiency and SECR compliance can foster an organizational culture that prioritizes sustainability. Regular workshops and updates can keep employees informed about best practices and regulatory changes.
  • Utilize Specialized Reporting Software: Leveraging advanced reporting tools designed for SECR compliance can streamline the reporting process. These tools often come with pre-configured templates, automated calculations, and compliance checklists that simplify data compilation and submission.
  • Set Clear Objectives and Targets: Establishing clear, measurable goals for energy reduction and emissions management can guide businesses towards continuous improvement. Regularly reviewing progress against these targets helps in making informed adjustments and demonstrating commitment to sustainability.
  • Maintain Detailed Documentation: Keeping comprehensive records of all energy-related data, methodologies used, and efficiency measures implemented is essential. This documentation not only supports accurate reporting but also ensures preparedness for any audits or reviews.
  • Benchmarking and Comparative Analysis: Comparing energy performance against industry standards and peer organizations can highlight areas for improvement. Benchmarking helps businesses understand their position in the market and adopt best practices emanating from industry leaders.
  • Stakeholder Engagement: Engaging with stakeholders, including investors, customers, and regulatory bodies, can enhance transparency and accountability. Regular communication of energy performance and initiatives can build trust and foster a positive corporate image.

By integrating these strategies, businesses can not only comply with SECR requirements efficiently but also drive substantial improvements in energy performance and sustainability. Continuous evaluation and adaptation of practices ensure businesses remain aligned with evolving regulations and contribute meaningfully to environmental conservation.

Conclusion

In conclusion, the SECR framework is pivotal in advancing the UK’s environmental sustainability goals by enforcing stringent reporting requirements on energy use and carbon emissions. Businesses must comply by implementing robust data collection systems, conducting regular audits, and setting clear sustainability targets. By enhancing transparency and accountability, SECR not only aids in combating climate change but also encourages organizations to improve energy efficiency and innovate. These efforts contribute to a greener, more sustainable future. Through diligent compliance and ongoing improvements, businesses can significantly reduce their environmental footprint and showcase their commitment to sustainability.

How we can help

Lythouse can significantly help companies improve SECR reporting and compliance through its comprehensive ESG software platform. The platform encompasses three key features: Account, Comply, and Transform. The Carbon Analyzer tool allows precision in measuring and managing carbon emissions across Scope 1, 2, and 3 by utilizing AI-powered spend classification, ensuring accurate data collection and analysis. For compliance, the ESG Reporting Studio feature supports adherence to global ESG regulations, simplifying the process of report preparation and submission. To drive improvement, the Goal Navigator aids in setting, tracking, and achieving sustainability targets through an intuitive dashboard, ensuring a continuous enhancement in ESG performance.

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