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What is SECR and Who Does It Apply To?

Picture of Emerald Power By  Emerald Power  ·  4 minute read

The Streamlined Energy and Carbon Reporting (SECR) framework is a comprehensive UK legislation aimed at improving energy and carbon emission transparency for large companies. Introduced in April 2019, SECR is part of the UK government’s strategy to transition towards a net-zero carbon economy by 2050. It mandates businesses to disclose their energy usage and greenhouse gas (GHG) emissions in annual financial reports, alongside details of any actions they have taken to improve energy efficiency. The framework not only ensures that companies monitor their energy use but also encourages proactive measures towards sustainability.

SECR replaced the CRC Energy Efficiency Scheme (CRC), which was seen as overly complex and burdensome. The new system aims to reduce complexity while expanding the scope to include more businesses and to encourage energy-saving measures across a broader spectrum of companies​

 

Detailed Overview of SECR

Purpose of SECR

SECR was introduced to promote a standardised approach to carbon reporting and energy efficiency in large organisations. By mandating energy and emissions reporting, the UK government seeks to:

  • Increase transparency around energy consumption and carbon emissions,
  • Encourage businesses to reduce their carbon footprint through energy-saving measures,
  • Help organisations identify inefficiencies in their energy usage and unlock potential cost savings.

This transparency also feeds into broader Environmental, Social, and Governance (ESG) reporting that is increasingly valued by investors and stakeholders. Businesses are encouraged to view SECR as an opportunity to position themselves as sustainable and responsible market leaders.

 

Who Does SECR Apply To?

SECR applies to three main types of organisations, provided they meet certain size criteria:

  1. Quoted Companies: Companies that are listed on a public stock exchange (e.g., the London Stock Exchange). These companies must report their global energy use and Scope 1 and 2 greenhouse gas emissions. Reporting on Scope 3 emissions (indirect emissions) is voluntary but highly recommended

  2. Large Unquoted Companies: Private companies that meet two or more of the following criteria:

    • A turnover of £36 million or more,
    • A balance sheet total of £18 million or more,
    • 250 or more employees.

    These companies are required to report energy use and emissions within the UK and associated GHG emissions​

  3. Large Limited Liability Partnerships (LLPs): Similar to large unquoted companies, large LLPs must also report UK energy use, GHG emissions, and energy efficiency actions if they meet the size criteria above​

In total, SECR affects approximately 11,900 businesses in the UK, covering around 42 million tonnes of CO2e (carbon dioxide equivalent), which is about 12% of the UK’s total emissions​

Reporting Requirements

To comply with SECR, companies must provide a detailed breakdown of their energy use and emissions. The specifics of the reporting differ depending on whether the company is quoted or unquoted:

  • Quoted Companies:

    • Global Scope 1 and Scope 2 emissions (direct and indirect emissions from owned or controlled sources),
    • Annual energy use (in kWh) for electricity, gas, and transport,
    • Energy efficiency measures undertaken during the year,
    • At least one intensity ratio (comparing emissions data with a business metric such as revenue or square footage),
    • Prior year figures to allow for year-on-year comparison,
    • The methodology used to gather and calculate the data (such as GHG Reporting Protocol, ISO 14064-1)

  • Large Unquoted Companies and LLPs:

    • UK energy use and associated GHG emissions from electricity, gas, and transport,
    • At least one intensity ratio,
    • Prior year figures for comparison,
    • Energy efficiency actions taken,
    • Reporting is done under a "comply or explain" approach. If a company is unable to provide specific data, it must explain why and how it intends to comply in the future​.

Exemptions

There are certain exemptions under SECR, particularly for smaller energy users. Businesses that use less than 40 MWh of energy in the reporting year are exempt from full reporting but must still include a statement in their financial reports to confirm their low energy use. Additionally, SECR contains a “comply or explain” clause, which allows companies to omit information if it is not feasible to collect it. However, they must explain why and aim to provide this data in future reports​.

 

Benefits of SECR

Beyond compliance, SECR provides several advantages to businesses:

  • Cost Savings: By monitoring energy use, companies can identify wasteful practices and inefficiencies, leading to cost reductions. For example, energy efficiency measures implemented by businesses have been shown to reduce operational costs over time​

  • Enhanced Corporate Reputation: As sustainability becomes a more critical factor for consumers and investors, SECR compliance can help businesses showcase their commitment to responsible environmental practices. This can lead to improved investor confidence and customer loyalty​.

  • Risk Mitigation: Reporting and reducing carbon emissions can help businesses manage future risks associated with energy price fluctuations, resource shortages, and stricter environmental regulations​.

SECR in the Context of UK Climate Goals

SECR plays a critical role in the UK's overall strategy to meet its climate goals, particularly the Net Zero by 2050 target. The legislation helps track the emissions of large organisations, which collectively contribute significantly to the UK’s carbon footprint. By encouraging energy efficiency and greater transparency, SECR helps drive progress toward reducing national GHG emissions​.

How to Comply with SECR

To comply with SECR, companies need to integrate their energy and emissions data into their Directors’ Report as part of their financial statements. They can either do this themselves by gathering the relevant data, or outsource the task to specialists who can prepare SECR-compliant reports. External validation is not mandatory but is recommended to ensure the accuracy and reliability of the data provided​.

Many businesses use third-party consultants to help with SECR reporting, ensuring compliance while identifying areas for energy-saving initiatives. Software platforms like Emerald Power also offer tools to streamline data collection, emissions calculation, and report preparation​.

Conclusion

The SECR framework is an integral part of the UK's efforts to reduce carbon emissions and promote energy efficiency among large organisations. While compliance may seem daunting at first, SECR provides businesses with an opportunity to not only meet regulatory requirements but also benefit from long-term cost savings, risk management, and enhanced reputation. For companies that qualify, investing in proper SECR reporting practices is a vital step toward becoming more sustainable and contributing to the UK’s climate change goals.

For more detailed insights and consultation on SECR, you can refer to: