Streamlined Energy and Carbon Reporting (SECR)
Legislation introducing the SECR has now been approved in the Houses of Parliament, the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. SECR will act as the new instrument for businesses to collect, measure and report on carbon compliance.
SECR will replace the CRC Energy Efficiency Scheme which is coming to an end after the 2018/19 compliance year.
It is worth noting that not all organisations that qualified for CRC will be in scope for SECR, as the qualification criteria has changed from energy consumption to size indicators for unquoted companies, and large LLPs. The criteria change however has resulted in approximately 7,900 additional companies anticipated to be required to comply with the scheme from April 2019.
It is important to note that revenue generated from the sale of allowances in the CRC scheme will be retained via an increased Climate Change Levy (CCL) rate, a non-commodity charge found within your utility bill.
The UK government has recognised that the range of energy efficiency policies in place to encourage organisations to invest in energy efficiency and decarbonisation are complex and place significant administrative burdens on qualifying companies.
In 2006, the UK government announced reforms to improve the tax and reporting regime by proposing to introduce a streamlined energy and carbon reporting framework by 2019.
The proposed SECR framework objectives are to:
• reduce the overall administrative burdens on participants.
• improving the incentive for organisations to save energy by improving energy efficiency in order to reduce energy bills and carbon emissions.
• drive behaviour changes by raising awareness of energy efficiency with organisational decision makers.
• boost the importance of energy efficiency in relation to the effect on an organisation’s reputation.
• increase transparency for investors and others so that companies can be held account.
- Quoted companies: i.e. those where equity share capital is listed on main market of LSE, officially listed in a European Economic Area, or admitted to dealing on either NYSE or NASDAQ.
- Large unquoted companies and LLPs: i.e. those meeting 2 or more criteria of large companies from Section 465-466 Companies Act 2006: £36m + turnover, £18m + balance sheet total, 250 + employees in one year.
- Qualifying UK registered subsidiaries of parent companies not registered in the UK.
- Public bodies which include limited company or LLP elements.
Exclusions within Group Level Reporting:
If an overall group Directors’ report / ‘Energy and Carbon report’ is prepared – subsidiary companies that would not qualify for SECR in their own right are not required to have their energy and carbon information included in the group report.
Similarly, a qualifying unquoted large company / LLP is not obliged to include energy and carbon information in their individual company accounts and reports if this information will be included within the higher group level Director’s Report / ‘Energy and Carbon report’.
**This is different to ESOS, where subsidiary companies that do not meet the qualification criteria individually are not exempt from the scheme**
Exclusions for Low Energy Users:
If 40MWh or less is consumed within the period that is being reported on (i.e. financial year concluding on or after 31st March 2020), the organisation is not required to make a full disclosure of energy and carbon information. Instead, a statement should be included within the Directors’ Report / Energy and Carbon Report, detailing that this is the reason for the non-disclosure.
If a group report is being prepared, this 40MWh threshold should be applied to the total energy consumption of the parent company, and subsidiaries that are quoted companies, unquoted companies or LLPs.
A new ‘Energy and Carbon Report’ section of the Directors’ reports (for quoted and unquoted large companies), or company accounts and reports (for large LLPs) is to be included for qualifying companies and LLPs with a financial year concluding on or after 31st March 2020.
Organisations in scope of SECR should report all energy use and associated GHG Scope 1 and Scope 2 emissions (as defined in 'who qualifies') that they are responsible for within this. NOTE: In the case of landlord/tenant arrangements, the party responsible for the consumption of energy should take the responsibility for reporting of it under this legislation.
Within this report there are certain elements that are required to be included. These are:
- For Quoted Companies:
- GHG Protocol Scopes 1 and 2 emissions (as currently included)
- Preceding year’s emission figures (as currently included)
- Methodology (as currently included)
- Minimum of one intensity ratio (as currently included)
- Underlying global energy use (from year concluding on or after 31st March 2020)
- This should also include a split of what is used/emitted in the UK and offshore
- Commentary on energy efficiency action taken (from year concluding on or after 31st March 2020)
- For Unquoted Companies / LLPs for financial year concluding on or after 31st March 2020:
- GHG Protocol Scopes 1 and 2 emissions
- Underlying UK energy use (including minimum of gas, electricity and transport)
- If reporting company is an offshore undertaking (i.e. activities consisting wholly or mainly of offshore activities, as defined in the 2018 Regulations), emissions and energy use for both UK and offshore operations must be disclosed
- Preceding year’s emissions and energy use figures (beginning in year 2)
- Minimum of one intensity ratio
- Commentary on energy efficiency action taken
Reporting under SECR should be included in the annual reporting compiled for Companies House. As these reports are not mandated to be submitted electronically, the government view is that mandating electronic reporting for SECR would be against the aim of simplifying the reporting methods of this data. There is an option to submit SECR information electronically on an optional basis from 2019. Mandatory electronic submission of this information is being held as a long-term option by BEIS for the moment.
If the Director report is a group report covering a number of UK registered qualifying subsidiaries, the company or LLP must make the required statements on the basis of its information and its subsidiaries.
There will also be some exemptions for disclosure of information should the Directors state that publication of this information will be seriously prejudicial to the interests of the company.
For a company with a financial year beginning 1st April 2019, compliant documents for SECR are required to be included in the first set of accounts published following 31st March 2020.
For companies with a financial year beginning 1st January 2019, SECR compliant documents will be included in the first set of accounts published following the 31st December 2020.
As the information reported through this scheme is included in company reports submitted to Companies House, it is anticipated that the Conduct Committee of the Financial Reporting Council will be responsible for monitoring compliance of the SECR information that will be included in company reports and accounts.
Should company reports not meet the reporting requirements, Companies House may reject the report submission, with a late filing penalty regime applying for non-compliance. The Conduct Committee also has authority to apply to the courts for an order requiring directors to prepare revised reporting / sets of accounts where it appears that the reporting requirements have not been met.
Inspired Energy viewpoint:
Although a streamlined and simplified framework is to be introduced, we anticipate a transitional period which will require organisations who qualify to review and make changes to how they collect data, report and demonstrate energy efficiency changes.
For those organisations that have not previously qualified for the CRC scheme, meeting the obligations of the new framework will be new and may be considered daunting.
Do I qualify for SECR?
From April 2019, 11,900 organisations in the UK will need to comply with the SECR framework this includes over 7,900 additional companies who will now be required to report on their carbon emissions for the first time.
If you would like to find out whether your company will qualify for the SECR from April 2019, simply email our optimisation team via firstname.lastname@example.org or fill in the enquiry form below.
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