Mandatory carbon reporting has gained prominence and become a requirement in many regions; the UK has sought to be ahead of the curve in working with organisations to address climate change and stepping up efforts to reduce carbon emissions.

A key milestone in these efforts was the introduction of Streamlined Energy and Carbon Reporting (SECR) as a vital tool for assessing and communicating a company's non-financial performance. 

What is SECR?

SECR is a mandatory legislation requirement that was implemented to get companies to consider their impacts and work towards reducing their consumption. Building on emissions reporting requirements, it came into play in April 2019, requiring over 12,000 UK companies to report energy consumption, their related greenhouse gas (GHG)  emissions and any steps to improve energy efficiency. The legislation aims to increase transparency in reporting GHG emissions, thus requiring companies to include a methodology for their emissions calculations and an intensity ratio using a business metric, which allows for comparison. It also aligns with broader international initiatives to promote corporate environmental stewardship and transparency.

Who does it apply to?

All UK-quoted companies are required to comply, as well as large-incorporated unquoted companies and limited-liability partnerships (LLPs), which meet two of the following criteria:

• Over 250 employees;
• Annual turnover of £36 million or over;
• Balance sheet total of £18 million or over.

Some exemptions apply, including public sector organisations and private companies that use less than 40,000kWh annually. 

How does it align with other reporting standards? 

SECR is an initiative that mandates companies to disclose their energy usage, a requirement now seen in regulations, standards, and frameworks for sustainability reporting.

The scope of the SECR legislation requires organisations to calculate their Scope 1 and Scope 2 emissions and partial Scope 3 emissions. This covers on-site fuel consumption, purchased electricity and transport fuel. The reporting scope of SECR overlaps with regulations such as the Energy Savings Opportunity Scheme (ESOS), Taskforce on Climate-related Financial Disclosures (TCFD) and International Sustainability Standards Board (ISSB), though the specific scopes covered vary for each of these frameworks. 

In addition, companies complying with SECR guidelines are better placed in terms of having an initial energy and GHG emissions reporting structure. This is a helpful starting point for voluntary reports and benchmarks such as GRESB, Global Reporting Initiative (GRI) and CDP. 

Why is SECR important?

As well as ensuring compliance with legislative requirements, reporting under SECR can help businesses improve energy data collection through robust data management processes, effectively measure their progress towards achieving Net Zero, and keep track of their yearly performance. Furthermore, it represents an opportunity for businesses to reflect on their credentials and take a more holistic approach to their sustainability strategy and reporting.

Companies that report in line with SECR reduce the risk of reputational damage and the risks associated with non-compliance. The Conduct Committee of the Financial Reporting Council is responsible for checking compliance with the SECR information provided, and penalties apply to both companies which do not report or if their report does not meet the requirements. 

What’s next?

The next few years are set to bring considerable development in the landscape for sustainability reporting, with a move towards more mandatory regulatory requirements.  Examples include the UK Green Taxonomy, the Corporate Sustainability Reporting Directive (CSRD), and the Task Force on Climate-related Financial Disclosures (TCFD), which are aligned to compliance or explain rules.

With SECR required since 2019 and the upcoming reporting legislations, businesses will need to make changes as vigorous energy data management processes will be fundamental to ensure compliance. 

Further information

Contact Vania Costa or Andrea Reyes Hernandez

Sustainability Consultancy