Government Response to the Streamlined Energy and Carbon Reporting (SECR) Consultation

23/07/2018

Streamlined Energy and Carbon Reporting (SECR) will begin in April 2019 to replace the carbon reporting gap left by the CRC which ends next year:  BEIS published the response to the SECR consultation this week.  BEIS received 155 SECR Consultation responses, covering the disclosure of energy and emissions information in mainstream financial reports.  SECR is part of a package of measures aiming to help businesses and industry improve energy efficiency by at least 20 per cent by 2030.  The new reporting framework builds on the existing Mandatory Greenhouse Gas Reporting (MGHG) by UK quoted companies and the Energy Savings Opportunity Scheme (ESOS).

Who will be captured by SECR?

  • SECR will be a UK wide reporting scheme.
  • The SECR reporting framework will apply to:
  • All quoted companies; and
  • Large UK incorporated unquoted companies with at least 250 employees or annual turnover greater than £36m and annual balance sheet of over £18m (two or more criteria need to apply to a company within a financial year)
  • BEIS are using the Companies Act definition of “large” and not the ESOS definition and so SECR will capture more companies than ESOS 
  • Around 11,900 companies will report under SECR (compared to 4,000 companies, plus 1,200 public and private sector bodies currently reporting under CRC)
  • Exemptions:
  • A de minimis threshold set at 40,000 kWh means that companies using low levels of energy to be exempt from reporting
  • There is an exemption for unquoted companies when it would not be practical to obtain some or all of the SECR information

How do companies report?

  • Companies will need to report under SECR using their annual report, by disclosing the information in the Director’s Report
  • Reporting via Annual Reports is mandatory, however, electronic format reporting will be voluntary for 2019 though mandatory electronic reporting is an option for the longer term
  • BEIS giving further thought to whether there will be a centralised mechanism for collating published energy and carbon data

What do companies report?

  • GHG reporting for quoted companies:
  • As under MGHG currently (in place since 2013), all quoted companies will continue to report on scope 1 and 2 GHG emissions, with scope 3 emissions on a voluntary basis
  • It is proposed that global GHG emissions reporting is now mandated for quoted companies, where practical
  • Reporting against an intensity metric will also continue
  • GHG reporting for unquoted companies:
  • Mandatory reporting of UK energy use, including electricity, gas and transport (transport is road, rail, air and shipping and the associated scope 1 and 2 emissions)
  • Mandatory reporting on Scope 1 and 2 emissions
  • Mandatory to report on at least one intensity metric (BEIS will work with business on consistency of ratios within sectors)
  • Reporting on scope 3 emissions is voluntary
  • There is an exemption on disclosing SECR information where it is not practical to do so as per the MGHG
  • Companies are required to provide a narrative commentary annually on energy efficiency action taken in the financial year, but will not be required to disclose ESOS recommendations and how they have been taken forward.
  • There is an exemption from disclosing information which the Directors think would be seriously prejudicial to the interests of the company.

Other points:

  • Many consultation respondents suggested that the CCA scheme should continue alongside SECR reporting and extend beyond 2023.
  • The Government will set up a more attractive carbon offset market to encourage businesses to offset carbon by planting trees etc.