Streamlined Energy and Carbon Reporting (SECR)
Streamlined Energy and Carbon Reporting (SECR) is a new mandatory reporting scheme for large unquoted companies and LLPs, coming into effect from 1st April 2019. SECR is being introduced as a replacement for the CRC scheme for qualifying large unquoted companies and LLPs, and includes additional requirements for reporting already undertaken by quoted companies under the Mandatory GHG Reporting scheme.
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. These companies will already be reporting on greenhouse gas emissions in their Directors’ Report, but will have some additional elements to include in this reporting following the introduction of SECR from April 2019.
- Large unquoted companies, and LLPs: i.e. those meeting 2 or more of the following criteria of large companies from Section 465-466 Companies Act 2006:
- >£36m turnover
- >£18m balance sheet total
- >250 employees in one year
This is to be re-evaluated on an annual basis, in order to account for changes in employee numbers and turnover, in accordance with other provisions made in the Companies Act 2006.
3. Qualifying UK registered subsidiaries of parent companies not registered in the UK
4. Public bodies which include limited company or LLP elements
Exclusions within Group Level Reporting:
If the Directors’ report / ‘Energy and Carbon report’ is prepared at a group level (i.e. the reporting is submitted to Companies House by an overall UK parent company), subsidiary companies that would not qualify for SECR in their own right are not required to have their energy and carbon information included in this 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 each company meeting the ‘large company’ criteria within the group. Large companies not reaching this 40MWh consumption threshold in a group do not have to be included in the group reporting.
It is at the group’s discretion as to whether to include emission figures for companies that would otherwise be excluded from the reporting, to provide a fuller picture of the group’s activities, and also to align with financial information within the Directors’ Report.
There is not a de minimis for SECR defined in the regulations, however, companies are able to exclude some emissions that are deemed to be immaterial in the context of the organisation’s operations and associated emissions. Materiality will vary depending on individual circumstance, however recommended best practice from BEIS is to ensure that omissions do not exceed 2-5% of overall emissions or energy. 2% has been highlighted as the optimum level of omission.
A new Energy and Carbon section of the Directors’ reports (for quoted and unquoted large companies), or (for large LLPs) inclusion of an ‘Energy and Carbon Report’ alongside the usual company accounts and reports is mandated for qualifying large companies and LLPs with a financial year concluding on or after 31st March 2020.
SECR mandates that all energy use and associated emissions that the reporting company are responsible for is reported on in the Directors’ Report.
Within the reporting, there are certain elements that are required to be included. These differ between Quoted Companies, and Large Unquoted Companies/LLPs, and are as follows:
- 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 outside of the UK.
- 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:
- UK energy use in kWh (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
- Associated greenhouse gas emissions (tCO2e)
- Preceding year’s emissions and energy use figures (beginning in year 2)
- Minimum of one intensity ratio
- Commentary on energy efficiency action taken
- UK energy use in kWh (minimum of gas, electricity and transport)
Energy usage data relating to the following is required to be collated and reported on. The report must show a figure in kWh of the energy consumed annually under these areas.
- Activities relating to the combustion of gas (this includes combustion of delivered fuels such as propane, butane and LPG);
- Activities relating to the consumption of fuel for the purposes of transport;
- The purchase of electricity for which the company is responsible for, including for the purpose of transport.
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.
How can Inspired Energy help?
Inspired Energy can assist companies in complying with SECR legislation in a simple, and cost-effective way, while at the same time ensuring that the required energy components are reported in a consistent fashion to the financial elements of the Directors’ Report.
Inspired Energy have an extensive history of working on government compliance schemes such as the CRC and ESOS, with 100% compliant external audits for both schemes by the Environment Agency. Feedback from these audits commend accuracy of reported data, and the steps taken in the reporting process for companies to ensure full compliance with legislative requirements.
Inspired Energy works to provide a personalised service for each company, ensuring that the statutory requirements are reported in a format that meets their individual needs.
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