SECR (also known as Streamlined Energy & Carbon Reporting) is compulsory for around 12,000 businesses throughout the UK. These businesses must provide information on their energy and carbon emissions on a yearly basis. Failure to submit an annual SECR report; if the deadline is missed or if the information is incorrect, may result in the business being fined.
What is SECR?
Do you need to comply with Streamlined Energy and Carbon Reporting (SECR) requirements?
All organisations that meet two or more of the following requirements must comply. SECR Regulations apply to all large businesses (as defined in the Companies Act), Limited Liability Partnerships and quoted companies.
- Turnover £36 million or more
- Balance sheet total £18 million or more
- 250 employees or more
What you must do:
The SECR report has to be filed with your company accounts each year and lodged with Companies House. It applies to the first financial year that starts on or after 1st April 2019, and each subsequent year. The reporting period is based on reporting companies’ financial year to align with existing financial and strategic reporting. Company accounts cannot be filed without the SECR report being included. SECR requires that companies include in their annual director’s report the following information:
- Annual UK greenhouse gas emissions (in tonnes of carbon dioxide equivalent (CO2e), as a minimum relating to gas, purchased electricity and transport fuel
- Associated energy use (in kWh)
- An emissions intensity ratio (e.g. tCO2e per full time equivalent employee, or other suitable indicator)
- A stated methodology used for calculating the footprint (e.g. SmartCarbon aligns to the Greenhouse Gas Protocol and uses the UK government emissions factors)
- A narrative on energy efficiency measures taken and planned. If no measures have been taken, this should be stated
- In future years, the prior year equivalent figures are also required to be disclosed for comparison, but this is not mandatory in the first year.
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Notes on legislation:
- The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (“the 2018 Regulations”) implement the government’s policy on Streamlined Energy and Carbon Reporting (SECR).
- SECR Regulations apply to all large businesses (as defined in the Companies Act), Limited Liability Partnerships and quoted companies. The definition of “large” is the same as applies in the existing framework for annual accounts and reports, based on sections 465 and 466 of the Companies Act 2006. The qualifying conditions are met by a company or LLP in a year in which it satisfies two or more of the following requirements:
- Turnover £36 million or more
- Balance sheet total £18 million or more
- Number of employees 250 or more
- These regulations came into force on the 1st April 2019. If applicable, companies must publicly report their carbon footprint for the first financial year that starts on or after 1st April 2019, and each subsequent year.
- SECR aims to align with pre-existing initiatives such as the Energy Savings Opportunity Scheme (ESOS) and replaces the CRC Energy Efficiency Scheme and Mandatory Greenhouse Gas (MGHG) Reporting for UK based quoted companies.
- The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 require quoted companies to report their annual emissions and an intensity ratio in their Directors’ Report. The 2018 Regulations bring in additional disclosure requirements for quoted companies. The 2018 Regulations also require large unquoted companies and limited liability partnerships to disclose their annual energy use and greenhouse gas emissions, and related information.
- A statutory de minimis exemption exists for companies that can confirm their energy use is 40MWh or less over the reporting period. Where this is the case, companies need to include a statement in their report confirming that they are a low energy user (i.e. comply or explain). If preparing a group report, the low energy user threshold applies to the energy consumption of the parent group and its subsidiaries.
Penalties for non-compliance:
This legislation applies to the first reporting year that starts on or after the 1st April 2019. You will need to include your energy and carbon performance within your annual report/directors report and submit this to Companies House. This will fall under the Financial Reporting Council (FRC)’s existing remit for audit and enforcement.
SECR is subject to the same compliance rules as financial reporting for Companies House. Therefore not reporting carbon and energy use could attract the same penalties as late financial filing and if carbon and energy was unreported or misreported through SECR, a named director or the organisation may be taken to court and could face an unlimited fine.