With increasing global attention on climate change and environmental responsibility, businesses are under greater pressure to reduce their carbon footprint and contribute to sustainability efforts. In the UK, one regulatory framework that helps streamline this effort is the Streamlined Energy and Carbon Reporting (SECR) scheme. Introduced in 2019, SECR aims to improve the transparency of energy use and emissions in companies while encouraging them to take steps to become more energy-efficient.
This article will dive into everything you need to know about SECR: what it is, who it applies to, how it works, and the benefits for businesses.
SECR is a regulatory framework that requires qualifying UK businesses to report their energy use, carbon emissions, and energy efficiency actions. It was implemented to replace the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme and expand the scope to more businesses.
The main goal of SECR is to improve energy efficiency and help companies reduce their greenhouse gas emissions. By making this information publicly available, SECR also seeks to increase transparency for stakeholders, investors, and customers who are increasingly concerned about sustainability.
SECR applies to three broad categories of organisations:
Quoted Companies – Any UK company listed on the main stock exchanges (e.g., London Stock Exchange, European Economic Area, or any other recognised stock exchange).
Large Unquoted Companies – These include any company that is incorporated in the UK and meets two or more of the following criteria:
Large Limited Liability Partnerships (LLPs) – Similar to large unquoted companies, LLPs must meet two or more of the criteria listed above.
Small companies and LLPs are exempt from SECR, although voluntarily reporting is encouraged for businesses looking to demonstrate their commitment to sustainability.
Companies falling under SECR must include the following information in their annual financial reports:
Energy Usage – This includes all energy used by the business, such as electricity, gas, and transport fuel. The scope includes direct (Scope 1) and indirect (Scope 2) emissions, while businesses are encouraged to report Scope 3 emissions, such as those from their supply chains, although it is not mandatory.
Carbon Emissions – Companies must calculate and report their greenhouse gas emissions in tons of carbon dioxide equivalent (CO2e) across the same scopes of emissions.
Energy Efficiency Measures – Businesses are required to disclose any actions they have taken to improve energy efficiency over the reporting period. It is important to note that companies are not penalised if they have not made improvements, but they must provide clear and honest reporting.
Methodology – Companies must detail the methodologies used to calculate their energy use and emissions. This ensures transparency and consistency in reporting across different sectors.
For businesses new to SECR, the process of calculating energy use and carbon emissions may seem daunting, but there are clear guidelines to follow. Here's a basic outline:
Measure Your Energy Use – Collect data on your energy consumption from gas bills, electricity usage, and fuel consumption. For transport, this could involve collecting mileage or fuel purchase records.
Convert Energy Use to Emissions – Once you've gathered your energy use data, convert it into carbon emissions using standardised conversion factors, which are typically updated annually by the UK government’s Department for Business, Energy & Industrial Strategy (BEIS).
Report Consistently – Ensure that you're following a consistent methodology year-on-year to allow for meaningful comparison and tracking of your energy use and carbon footprint.
Many businesses choose to work with consultants or use software tools that automate much of the process, ensuring compliance with SECR requirements without requiring internal expertise.
While SECR places a regulatory burden on companies, it also provides numerous benefits, particularly for those that view sustainability as a business opportunity rather than a compliance task.
Cost Savings – By identifying energy inefficiencies, companies can take steps to reduce their energy consumption, leading to significant cost savings in the long term. Efficient energy use is often closely tied to operational efficiency, making this an area where businesses can improve their bottom line.
Reputation and Transparency – Companies that demonstrate a commitment to sustainability and transparency may gain a competitive edge, especially as consumers and investors increasingly favor environmentally responsible organizations.
Stakeholder Confidence – Transparent reporting builds trust with stakeholders, investors, and customers. SECR allows businesses to show that they are proactively addressing climate concerns and working toward reducing their carbon footprint.
Compliance with Future Regulations – Environmental regulations are likely to become more stringent in the coming years. SECR can help businesses stay ahead of the curve, ensuring that they are well-prepared for future carbon reporting frameworks or energy reduction mandates.
Failure to comply with SECR requirements can lead to significant repercussions, including penalties from the Companies House. Inaccurate or misleading reporting could damage a company’s reputation, erode stakeholder trust, and expose it to legal or financial risks.
Businesses should prioritise timely and accurate compliance with SECR regulations to avoid these issues. Engaging in best practices around energy use and sustainability can also offer long-term protection against potential regulatory tightening.
The Streamlined Energy and Carbon Reporting framework is a crucial tool in the UK’s effort to reduce carbon emissions and promote energy efficiency in businesses. While it may require additional administrative work, SECR offers companies an opportunity to improve their energy performance, reduce costs, and position themselves as environmentally responsible players in their industries.
By understanding the SECR requirements, calculating energy use, and acting on energy efficiency insights, businesses can not only comply with regulations but also reap financial and reputational rewards.
Sustainability isn't just a regulatory demand – it's a competitive advantage, and SECR provides a clear framework for companies looking to lead the charge toward a greener future.