What is SECR?

What Is SECR?

SECR stands for Streamlined Energy and Carbon Reporting, a UK regulation introduced to simplify carbon and energy reporting while encouraging energy efficiency and emissions reduction across businesses. SECR aims to align with the UK's ambitious goal of achieving net-zero carbon emissions by 2050.

Under SECR, businesses must disclose their energy use, associated greenhouse gas (GHG) emissions, and energy efficiency measures in their annual financial reports.

Is SECR Mandatory?

Yes, SECR is mandatory for qualifying organizations in the UK. These include:

1. Quoted Companies: All companies listed on the main market of the London Stock Exchange, a European Economic Area market, or any other market officially listed as part of the Official List.
2. Large Unquoted Companies: Companies meeting at least two of these criteria:
   • Annual turnover exceeding £36 million
   • Balance sheet total over £18 million
   • More than 250 employees
3. Large LLPs (Limited Liability Partnerships): LLPs meeting the same size criteria as large unquoted companies.

Non-qualifying companies are exempt but may voluntarily report to showcase their environmental efforts.

Who Needs to Comply with SECR?

SECR applies to large businesses incorporated in the UK, including:

• Quoted Companies: Publicly listed companies of any size.
• Large Unquoted Companies and LLPs: Meeting two of the three size criteria (turnover, balance sheet, employees).

Businesses operating outside the UK but incorporated within the country must also comply if they meet the criteria. Small businesses, sole traders, and medium enterprises are typically exempt unless they choose to voluntarily adopt SECR principles.

What Are the Exemptions to SECR?

Not all organizations are required to comply with SECR. Here are some common exemptions:

1. Small and Medium Enterprises (SMEs): Companies not meeting the large company criteria.
2. Low Energy Usage: If energy consumption is less than 40,000 kWh annually, businesses can omit energy and emissions reporting but must declare the exemption in their annual report.
3. Companies Exempt by Law: Businesses prohibited from disclosing information on energy use or emissions for reasons such as national security.

It’s also worth noting that companies with subsidiaries may need to report consolidated data, depending on their group structure.

When Did SECR Come Into Effect?

SECR regulations officially came into force on April 1, 2019, replacing the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. The first SECR reports were required for financial years beginning on or after that date.

This transition from CRC to SECR aimed to simplify the reporting process and reduce administrative burdens while maintaining robust oversight of corporate energy use and carbon emissions.

Does SECR Include Scope 3 Emissions?

SECR primarily focuses on Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased energy). However, reporting on Scope 3 emissions (indirect emissions from the value chain, such as transportation, supply chains, and waste) is voluntary under SECR guidelines.

Businesses are encouraged to include Scope 3 emissions if they are material to their operations, but this is not mandatory. Including Scope 3 data can provide a more comprehensive picture of an organization’s carbon footprint, demonstrating leadership in sustainability.

How Do Businesses Comply with SECR?

To meet SECR requirements, companies must include the following in their annual reports:

1. Energy Consumption: Total energy use in kWh across all UK operations.
2. Carbon Emissions: Greenhouse gas emissions categorised as Scope 1 and Scope 2.
3. Energy Efficiency Actions: Summary of measures taken during the financial year to improve energy efficiency.
4. Methodology: Clear explanation of the methods used to calculate energy use and emissions.

Organizations must also ensure that their reports are prepared in accordance with government-approved reporting standards, such as the Greenhouse Gas Protocol.

Why Is SECR Important?

SECR is more than just a compliance requirement; it plays a pivotal role in driving the UK's transition to a low-carbon economy. By enforcing transparency, SECR:

• Encourages businesses to monitor and reduce energy usage.
• Highlights energy efficiency as a competitive advantage.
• Enables stakeholders to assess a company's environmental impact.
• Aligns with broader global initiatives to combat climate change.

Moreover, businesses that excel in energy management and emissions reduction may enjoy reputational benefits and improved relationships with environmentally conscious investors and customers.

SECR represents a significant step forward in the UK’s commitment to sustainability and energy efficiency. While the regulation may seem complex, understanding its requirements and implications can help your business stay compliant and contribute to a greener future.

If your organization is affected by SECR, taking proactive steps to monitor energy use and emissions will not only ensure compliance but also position your business as a responsible leader in sustainability.