SECR stands for ‘Streamlined Energy and Carbon Reporting’. It requires some organisations to report on energy use, amongst other environmental information, in annual reports. 

The scheme was brought into force on 1st April 2019 by The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (‘the 2018 Regulations’).  This means organisations in scope need to comply for financial years starting on or after 1st April 2019. 

It is expected nearly 12,000 organisations are affected by the 2018 Regulations and are required to report environmental information. 

Within your Legislation Update Service environment legal register, you will find the 2018 Regulations as an amendment to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, as this was how legally the SECR framework was brought into force.  

Some companies, depending on their size, have had to include environmental information in company reports for several years, so for some sizeable companies this is not a new requirement but rather an updated one.  

The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 required quoted companies to report their annual emissions and an intensity ratio in their Directors’ Report. Quoted companies have therefore had to report this information since 2013. 

The 2018 Regulations bring in additional reporting requirements for quoted companies and introduce requirements for large unquoted companies and limited liability partnerships to disclose their annual energy use and greenhouse gas emissions, and related information.  

The introduction of the SECR framework follows the closure of the CRC Energy Efficiency Scheme (formerly known as the “Carbon Reduction Commitment) which closed after the 2018/19 compliance year. The CRC Scheme required large energy users in the public and private sectors across the UK to monitor and report their energy use annually. Participants had to purchase and surrender allowances for every tonne of carbon they emitted. SECR is seen as a ‘replacement’ for the CRC Scheme. 

The SECR framework applies to: 

• quoted companies; 
• large unquoted companies (including charitable companies); and 
• large Limited Liability Partnerships (LLPs). 

According to the Government guidance document, quoted companies are those whose equity share capital is officially listed on the main market of the London Stock Exchange, or is officially listed in a European Economic Area State, or is admitted to dealing on either the New York Stock Exchange or NASDAQ. 

SECR applies to large unquoted companies incorporated in the UK which are required to prepare a Directors’ Report under Part 15 of the Companies Act 2006. This applies to both registered companies and to un–registered companies.  

‘Large’, as defined by the Companies Act 2006, is the same as applies in the existing framework for annual accounts and reports. Companies are classed as large if they meet two of the following in both the current and the previous financial year: 

• Turnover of more than £36 million
• Total assets of more than £18 million
• Number of employees more than 250

Limited Liability Partnerships (LLPs) are obligated to report under the SECR framework if they are ‘large’, which is the same definition as above for unquoted companies. 

If you are responsible for reporting at a group level then you must report your own information and the information of any subsidiaries included in the group which are quoted companies, unquoted companies or LLPs. Subsidiaries that would not be required to report on their own account can be excluded. 

Note: this is a different approach to that taken under the Energy Savings Opportunity Scheme (ESOS). For ESOS, a smaller subsidiary of a parent company cannot be excluded from the scheme even if it does not meet ESOS eligibility criteria on its own. 

If you are responsible for reporting at a subsidiary level and your parent company is reporting information for SECR, you might not be required to include your energy and carbon information in your own accounts and reports.  

• Public bodies, although they may still have other reporting requirements such as under the Greening Government Commitments
• Companies incorporated outside of the United Kingdom – this includes foreign parent companies of UK subsidiaries

Reporting requirements are different for quoted and unquoted organisations.

Quoted companies: 

• Annual GHG emissions from activities for which the company is responsible including combustion of fuel and operation of any facility; and the annual emissions from the purchase of electricity, heat, steam or cooling by the company for its own use
• Underlying global energy use
• Previous year’s figures for energy use and greenhouse gas emissions. 
• At least one intensity ratio
• Energy efficiency action taken
• Methodology used

Large unquoted companies and limited liability partnerships: 

• UK energy use (as a minimum gas, electricity and transport, including UK offshore area) 
• Associated greenhouse gas emissions 
• Previous year’s figures for energy use and greenhouse gas emissions. 
• At least one intensity ratio
• Energy efficiency action taken 
• Methodology used

Organisations will already have much of the information required to comply with the new requirements. Participation in other schemes, such as the CRC Energy Efficiency Scheme (CRC), Energy Savings Opportunity Scheme (ESOS), Climate Change Agreements (CCA) Scheme, EU Emissions Trading System (ETS) or MGHG reporting and voluntary environmental reporting frameworks, will help organisations meet their new obligations as the required data for SECR may already have been captured for other schemes. Organisations should make use of any systems they may already have in place. 

Where an organisation is a low energy user it is not required to report on energy and carbon information. Instead, it is required to state in its relevant report that its energy and carbon information is not disclosed for that reason. 

Low energy users are quoted, unquoted companies or LLPs who have consumed 40MWh of energy or less in the year. For companies preparing a group report the assessment is of the energy consumption of the parent and all its subsidiaries. For reference, 40MWh is the equivalent of the energy use of around 40 households. 

The legislation does allow for energy and carbon information to be excluded only if reporting this would be seriously prejudicial to the interests of the organisation. The relevant report must state that the energy and carbon information is not disclosed for that reason. This must only be used in exceptional circumstances and will likely be investigated by the Financial Reporting Council (FRC). 

Exclusion is also allowed if it is not practical to obtain energy and carbon information. The relevant report must still state what energy and carbon information is not included and why. 

Information can be in the company’s Director’s Report or Strategic Report. 

Companies in scope of the legislation will need to include their energy and carbon information in their Directors’ Report as part of their annual filing obligations with Companies House. 

Where energy usage and carbon emissions are of strategic importance to the company, disclosure of the relevant information may be included in the Strategic Report instead of the Directors’ Report. A statement explaining this has been done must be included in the Directors’ Report. The aim of the Strategic Report is to pull together the company’s strategy, business model and risks, and link these through to the financial statements. 

Large LLPs have different annual filing obligations, so they must prepare an equivalent report to the Directors’ Report which is known as the Energy and Carbon Report. This is required for each financial year and includes their energy and carbon information. The Energy and Carbon Report must be approved by the LLP’s members and signed on behalf of the LLP by a designated member. 

Quoted companies will have been reporting on emissions since 2013. The new requirements apply to reports for financial years starting on or after 1 April 2019. So, if your organisation’s financial year runs from April – March then your first year of reporting will be for the financial year 1st April 2019 – 31st March 2020. Compliance does not have to be reported into a regulator in the way it has to for schemes such as ESOS. 

There is no requirement in the legislation for emission and energy use data, or information on energy efficiency action to be independently assured; however, it is recommended as best practice. 

The Conduct Committee of the Financial Reporting Council is responsible for monitoring compliance of company reports and accounts with the relevant reporting requirements, imposed on companies and LLPs by Part 15 of the Companies Act 2006. 

There is no prescribed format for reporting. Organisations could develop their own format to fit their business but any reporting format should provide at least the minimum information requirements and comparisons of data for the previous year (as it becomes available) in as accessible a format as possible. 
 
The Government has provided a reporting template for both quoted companies and unquoted companies & LLPs within its guidance document ‘Environmental Reporting Guidelines: Including streamlined energy and carbon reporting guidance’ on page 51. It is strongly encouraged that this template is used to facilitate consistency of disclosed information. 

Below is an overview of how an organisation could go about gathering and recording its environmental data required by this legislation. 

Set organisational boundaries

If the organisation owns 100% of the assets it operates and has a simple organisational structure then setting the boundaries should be relatively easy; however, for organisations with more complex structures this could be more complicated. Annex A of the Government’s guidance document provides more details of the approaches to setting organisational boundaries. 

Determine the period for reporting data

Your reporting period should be for 12 months and should ideally correspond with your financial year because this allows for easier comparison of your financial performance with other aspects of your performance. If they are different, the majority of your environmental reporting year should fall within your financial year and it should be made clear in the report the annual period is not the same as the financial year covered by the report. 

Determine key environmental impacts

You need to work out which environmental issues are key for your organisation and this is dependent on the activities you carry out. These are likely to fit into the following categories of: greenhouse gases, water, waste, materials and resource efficiency, biodiversity / ecosystem services, emissions to air, land and water. Government guidance suggests setting at least 3 key performance indicators (KPIs) associated with your key environmental impacts. 

Measure

Relevant data needs to be collected and managed. Ideally, environmental reporting should be integrated into your existing reporting processes and if you operate an environmental management system (EMS) it can facilitate this environmental data collection. Using a standardised reporting format should ensure that data received from different business units and operations is comparable.  

Report

When reporting the data, you should be as transparent as possible and state why and how you have collected the data and to which parts of your organisation the data relates.