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.

Why has the SECR framework been proposed?

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.

Who will need to comply with the SECR framework?

Approximately 11,900 organisations in the UK will now need to comply with the SECR framework. These include:
• Quoted companies (already obliged to measure and report their greenhouse gas emissions in their director’s report)
• All large UK incorporated unquoted companies and LLPs [1]
o Large companies registered in the UK meeting the eligibility thresholds, but with overseas parent companies, will also qualify for SECR.
• Public bodies which include limited company or LLP elements and meet eligibility thresholds
o Thresholds on the proportion of limited company operations within public bodies for inclusion in SECR are not yet known.

[1] The Companies Act 2006 definition of “large”: companies fulfilling at least 2 of the following conditions in the financial year: at least 250 employees, annual turnover greater than £36m, an annual balance sheet total greater than £18m.

Are any companies excluded?

• UK subsidiaries that qualify for SECR will not be required to report if they are covered by a UK parent’s group report
• Qualifying large companies that are not registered in the UK.
• Organisations not registered as companies, for example public sector organisations, some charities and some private sector organisation
• Qualifying large companies using less than 40,000kWh of energy in the reporting year.

What will be required from reporting?

UK Quoted Companies
All UK Quoted Companies will be required to report in their Director’s report on their global GHG emissions and intensity metric in annual reports. This is in line with the existing Mandatory GHG (MGHG) reporting already included in annual reporting by UK quoted companies.
SECR additionally requires total underlying energy use, and any energy efficiency action taken to be reported in this way.

Qualifying Unquoted Companies and LLPs
Large unquoted companies and large LLPs will be required to include the following information within their Directors’ report or LLP equivalent:
• UK energy use and associated scope 1 and scope 2 emissions (as a minimum)
o UK energy use encompasses electricity, gas & transport consumption data (as a minimum)
• Use of an intensity metric (chosen by companies)
• Energy efficiency action taken in period of report
o This should include the methodologies used in calculation of disclosures

Reporting on energy efficiency actions taken within the financial year being reported on should be included as a narrative commentary. While recommendations resulting from ESOS assessments, and how they have been taken forward is a suitable method for this reporting, companies are not required to disclose these under SECR.

How should companies report?

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.

Timings for reporting.

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 2021.

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.

What next…
Guidance on the practical implementation for SECR is expected to be published by the end of November 2018, which will reflect requirements from April 2019. It is important to be mindful of the legislative now in place. We can assist you by:

  • Identify whether they meet the qualifying criteria for SECR
  • Keep up-to-date with the latest SECR developments
  • Provide advice on how to mitigate the impact of SECR once the reporting guidelines are published

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, get in touch.

Stay ahead by being kept up to date…

We are keeping abreast of all updates associated with the SECR framework. If you would like Inspired Energy to keep you updated with the latest developments, complete the contact form today!

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