By Gavin Tivey, Principal Consultant at EcoAct.
After the data collection and reporting delight that was the last round of ESOS compliance, you may think that, what with everything else going on, you are free from energy data reporting challenges for a while. Unfortunately, it’s time to get ready for more compliance.
The Streamlined Energy and Carbon Reporting (SECR) regulations are now in force for financial years starting on or after 1st April 2019. They apply to all UK incorporated quoted companies and any unquoted companies which meet at least two out of the three following criteria in the reporting year:
- 250+ employees,
- turnover over of £36 million
- balance sheet of over £18 million in the reporting year.
Streamlined reporting for quoted companies
If you are a quoted company the new regulations are an extension of the Mandatory GHG Reporting regulations and also incorporate some of the energy-related work already undertaken during ESOS. This is good news for streamlining your energy and carbon reporting. However, SECR does come with additional requirements.
You will already be reporting your global carbon footprint, an intensity metric and details of your carbon footprint calculation methodology in your Directors report. In addition, you must now split your emissions reporting between the UK and its offshore area and the rest of the world. You must also report the related energy use in kWh from which your reported emissions are calculated. You only need to report the total energy use which applies to your Scope 1 and Scope 2 emissions.
You will continue to report an intensity metric relevant to your business. The UK Government guidance document for these regulations implies that this could also be split between the UK and the rest of the world. Splitting it this way may make it difficult to compare the current year with previous years, so you should consider which option best meets the needs of your stakeholders and aligns best with your wider reporting and measurement metrics.
You must now also add narrative in your report to describe which energy efficiency measures you have implemented in the reporting period, and this is where your ESOS work will be useful. The narrative reporting requirements are not extensive, (a paragraph of information should do it) but they do apply to “the principal measures taken for the purpose of increasing the businesses’ energy efficiency in the relevant financial year”. As the basis of the regulations are “comply or explain”, then if no measures have been taken this should also be included in the report.
Streamlined reporting for unquoted companies and LLPs
If you are an unquoted company or LLP which meets the thresholds for reporting outlined above, first thing to consider is your qualification for this reporting year. If you are about to prepare your directors report for 2019-20 and you meet the thresholds, in will need to include your UK energy use and emissions in line with SECR. If you do not already collect this information, now would be the perfect time to start!
Due to the current COVID-19 pandemic, the Financial Reporting Council encourages companies to make use of the extension announced by the Financial Conduct Authority to the deadline for publication of audited annual financial reports from four to six months from the end of the financial year. This may also provide you more time to prepare your SECR material.
You should report, as a minimum, your UK electricity and gas use related to your activities and any transport fuel your company has paid for. The regulations require you to consider and report energy use and emissions “for which you are responsible” so even if your offices are leased, the energy you use to provide your business’ services could reasonably be assumed to be your responsibility and so should be included. Fuel use that you have paid for includes mileage reclaims by your staff, so you need to understand the fuel and energy requirements of both your company owned fleet and any grey fleet.
You will also need to provide the same information on energy efficiency measures as quoted companies. Energy and carbon compliance may be a new requirement for you so not immediately good news for streamlining your reporting activities. However, it does come with potential opportunities.
The purpose and potential of SECR
The stated intent of the regulations is to increase awareness of energy costs within large and quoted organisations, including enhanced visibility to key decision makers. Whether the information on energy use necessarily increases awareness of its costs is debatable, but in theory this could drive forward energy efficiency measures and cost reductions.
Stakeholders now have a way to check on the energy efficiency actions you are taking on an annual basis and will be able to see, albeit in relatively crude terms, the impact of these on your energy use and on your wider impact on the atmosphere and on climate change. You could use this compliance obligation as a stepping stone to voluntarily increase the scope of your carbon reporting, set a carbon reduction target or even consider PAS2060 certified carbon neutrality, a science-based target or a net zero commitment.
SECR’s similarities with ESOS should help many companies in developing streamlined data collection processes and this information can be used effectively to reduce costs and enhance the information that stakeholders increasingly demand. We at EcoAct consider this a great opportunity to programme the implementation of the measures identified during ESOS to really start to understand your carbon footprint as the first step in an integrated carbon and energy management process.
In summary, streamlined energy and carbon reporting may not exactly live up to its name, and in many cases it will create additional work for you in both complying with the regulations and in demonstrating progress in energy efficiency. But as you have to comply, why not use it as part of your wider engagement with the issue of climate change and possibly save yourself some money into the bargain.
For more information about the requirements of SECR and the potential for your organisation, access our Factsheet here.
EcoAct is a privately held international sustainability consultancy and project developer, headquartered in Paris, with 120 employees in offices across France, the United Kingdom, Spain, the United States and Kenya. The company has unmatched depth and breadth in delivering solutions to enable businesses to reduce their carbon emissions while driving commercial performance.
EcoAct has undertaken carbon reduction and sustainability projects for some of the world’s leading brands while also developing and partnering with carbon offset, biodiversity and economic development programmes across Africa, Asia, China and South America. EcoAct is a CDP gold partner, a founding member of ICROA, a strategic partner in the implementation of the Gold Standard for the Global Goals and reports to the UN Global Compact.
For more information, visit www.eco-act.com.
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