New rules to encourage business energy efficiency with SECR

Businesses need to be up to speed with the Government’s new Streamlined Energy and Carbon Reporting (SECR) policy which mandates them to disclose their energy and carbon emissions.

The policy, which came into effect on April 1st this year, affects almost 12,000 companies under the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.

SECR builds on – but does not replace – existing requirements that companies face, including mandatory greenhouse gas reporting for quoted companies, the Energy Saving Opportunity Scheme (ESOS), Climate Change Agreements (CCA) Scheme, and the EU Emissions Trading Scheme (ETS). SECR extends the reporting requirements for quoted companies and covers new annual disclosures for large unquoted and limited liability partnerships (LLPs).

SECR aims to encourage the implementation of energy efficiency measures to more organisations which are designed to bring about both economic and environmental benefits as cost are cut, productivity increased and carbon emissions reduced in the drive to a low carbon economy.

Companies that fall within the following definitions fall into the categories which must comply with the new rules unless they meet certain exemption criteria:

  1. Quoted companies of any size that are already obliged to report under mandatory greenhouse gas reporting regulations.
  2. Unquoted companies incorporated in the UK that meet the definition of ‘large’ under the Companies Act 2006 will have new reporting obligations. This applies to registered and unregistered companies. Note that the criteria for ‘large’ differs from the ESOS Regulations.
  3. ‘Large’ Limited Liability Partnerships (LLPs) will be required to prepare and file a ‘Energy and Carbon Report’.

Unquoted companies or LLPs are defined as ‘large’ if they meet at least two of the following three criteria in a reporting year:

  • a turnover of £36 million or more;
  • a balance sheet of £18 million or more; or
  • 250 employees or more.

Public bodies do not fall under the new regulations, although other legislation which requires carbon reporting does apply.

Low energy users  – 40MWh or less over the reporting period – are exempt.

Charities, not-for-profit companies or others undertaking public activities – such as companies owned by universities, academies or NHS Trusts – should check if they meet the above qualifying criteria.

Private sector organisations not covered by the SECR have been encouraged to follow the principles on a voluntary basis.

Quoted companies must report their global scope 1 and 2 GHG emissions in tonnes of carbon dioxide equivalent (including all seven gases included under the Kyoto Protocol), and a chosen emissions intensity ratio in their Directors reports for the current and previous reporting periods.

In addition, they will be required to report their underlying global energy use for the current reporting year.

They must also identify the split between UK and offshore energy use in other countries. Annual comparisons are also required.

As a minimum, unquoted large companies and large LLPs will need to report UK energy use from electricity, gas and transport fuel – as well as the associated GHG emissions – including at least one intensity metric.

Transport energy should include business usage where the company is supplied with the transport fuel, for example in company cars and on-site vehicles, but not fuel associated with air, rail or taxi journeys that the company does not operate, or fuel for the transportation of goods contracted to a third party.

Quoted and unquoted companies and LLPs all need to report energy use, GHG emissions and at least one emissions intensity metric for the current and previous financial years plus a description of measures taken to improve the business’s energy efficiency in that year and a note on any resulting energy savings.

There is a ‘comply or explain’ clause, which allows carbon and energy information to be excluded where it is not practical to obtain it, or in exceptional circumstance that disclosure would be ‘seriously prejudicial’ to the interest of the organisation. In such circumstances, an explanatory statement should be included.

External verification of processes and data is not obligatory but is recommended as best practice – a service Syntegra is delighted to provide to customers. For full details, please get in touch.

* In 2015, world leaders agreed to 17 goals for a better world by 2030. https://www.globalgoals.org/ These goals have the power to end poverty, fight inequality and stop climate change. Guided by the goals, it is now up to all of us, governments, businesses, civil society and the general public to work together to build a better future for everyone. Syntegra’s work is underpinned by many of the goals.

Global Goals 13: Climate Action

Take urgent action to combat climate change and its impacts

Target 13.2: INTEGRATE CLIMATE CHANGE MEASURES INTO POLICIES AND PLANNING

Integrate climate change measures into national policies, strategies and planning.