The new Streamlined Energy and Carbon Reporting (SECR) regulations were implemented in April 2019 when the Companies (Director’s Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 came into effect.
SECR is a mandatory energy and carbon reporting scheme that has replaced the Carbon Reduction Commitment. (CRC). However, unlike the CRC Scheme SECR is not a carbon tax and such there is no definitive cost for SECR compliance. It has been designed to streamline and reduce the complexity of carbon and energy reporting while at the same time broadening the scope of reporting compliance.
1. Who needs to comply?
The regulations require an estimated 12,000 UK companies to disclose information relating to their energy consumption. All UK quoted and large unquoted companies and LLPs are required to comply.
‘Quoted companies’ are defined as those whose shares can be bought and sold on the stock exchange.
‘Large companies’ and LLPs are defined as those which meet two or more of the following criteria:
250 employees or more;
An annual turnover greater than £36 million; or
An annual balance sheet greater than £18 million.
Organisations may fall within the scope of the SECR even if they are undertaking public, or not for profit activities as registered companies or LLPs owned by universities, academies or NHS Trust.
2. Group and subsidiary report
If you are reporting at group level, for a financial year for which you are required to prepare a group Director’s Report, when making your energy and carbon disclosures, you must take into account not only your own information, but also the information of any subsidiaries included in the consolidation which are quoted companies, unquoted companies or LLPs.
Companies that are not registered in the UK (non-UK incorporated) are not obliged to file annual reports at Companies House, and will, therefore, fall outside the scope of the mandatory SECR framework. However, where a parent company is not registered in the UK but has subsidiaries that are registered in the UK, these subsidiaries, if qualifying for SECR in their own right, would need to report.
A subsidiary is not obliged to report their energy and carbon information if:
They are a “subsidiary undertaking” at the end of the relevant financial year;
They are included in the group Report (whether a group Directors’ Report or a group Energy and Carbon Report) of a '“parent undertaking”;
The group Report is prepared for a financial year of the parent that ends at the same time as, or before the end of, the subsidiary’s financial year; and
The group Report complies with the relevant obligations on the parent to report energy and carbon information for themselves and their subsidiaries; but this provision does not apply where the group Report relies on the seriously prejudicial option
3. Who is exempt? Comply or explain
Companies who can demonstrate the following may be exempt from reporting under the SECR:
Companies who are able to confirm that their energy use is < 40,000 kWh over the 12 month reporting period;
Companies where it is “not practical to obtain such information”. E.g. it may not be practical for firms to report if their energy usage is commercially sensitive; or
Companies which are a UK subsidiary of a global business but are not UK incorporated.
4. What must be reported under the SECR?
The SECR regulations require qualifying companies to provide details on all of their UK electricity, gas, combustible fuels and transport energy use and its associated emissions. A narrative will be required within the annual report to provide an overview on energy efficiency measures that have been undertaken during the previous financial year and an energy intensity metric will also need to be included.
You are not required to report on other emissions associated with inputs into your company (such as emissions from your supply chain) or emissions linked with outputs from your company (such as emissions from your products when they are used by your customers).
Note this is different to the approach taken under ESOS, where a smaller subsidiary of a parent company is not exempt, even where on its own, it would not meed ESOS eligibility criteria. Similarly, this is also different from the approach under the CRC Energy Efficiency Scheme.