Streamlined energy and Carbon reporting (SECR)

It is mandatory for both large unquoted businesses and listed companies incorporated in the UK to report on their energy use and carbon emissions.

The energy and carbon report requirement are required by Schedule 7 of the Large and Medium-sized (Accounts and Reports) Regulations.  This report is often referred to as an SECR report as the project which gave rise to it, intended to simplify previous requirements, was called Streamlined Energy and Carbon Reporting. 

Why were the SECR requirements introduced?

The stated intentions of the Regulations were to:

• Increase awareness of energy costs;
• Ensure administrative burdens associated with energy use and emissions reporting are proportionate and aligned with existing energy reporting requirements;
• Provide organisations with the right data to adopt effective energy efficiency measures and take opportunities to reduce their impact on the environment, and;
• Provide greater transparency for investors on energy efficiency and readiness for a low carbon emissions and low GHG emissions environment.

Which businesses are affected by the SECR Requirements?

The requirements are from the Large and Medium-sized Companies and Groups Regulations 2008 (“The Regulations”) and apply to:

• Quoted companies¹; 
• Large unquoted companies, including AIM-listed companies and private companies', and;
• Large LLPs.

Companies and LLPs are defined as large where they exceed two or more of the following thresholds in the last two preceding financial years:

• Annual turnover > £36 million;
• Balance sheet total > £18 million, and;
• Number of employees > 250.

¹A quoted company means a company whose equity share capital is included in the UK Official List; is officially listed in an EEA state; or is admitted to dealing on either the New York Stock Exchange or the Nasdaq.

Group reporting

Energy use and emissions reporting can be done on a group basis within the UK. For the purpose of determining the ‘large’ thresholds above, the calculation must be performed on a group basis for parent companies, therefore including subsidiary undertakings even where consolidated accounts are not prepared.

There is, however, the option to exclude subsidiaries from the energy use and emissions group reporting if the subsidiary itself does not fall within the scope of the SECR Requirements. Individual subsidiary undertakings do not need to prepare separate energy use and emissions information in their annual reports if they are included within the group’s reporting (as prepared in accordance with the Regulations) of the parent undertaking.

There are additional provisions in place for companies and LLPs which move above or fall below the thresholds from year to year and which allow gross figures (i.e. before consolidation adjustments) to be used as the size criteria (with higher thresholds).

What needs to be reported?

Quoted and unquoted businesses have different requirements with those for quoted companies being more extensive.

Unquoted large companies and LLPs, including AIM-listed companies

Unquoted businesses must prepare and provide information in their annual reports as follows:

• UK energy use, covering at a minimum: purchased electricity, gas and petrol/diesel use for transport (expressed in kWh) – this includes fuel use or mileage for all company vehicles and other vehicles driven on company business where fuel is purchased by or for the company;
• Associated GHG emissions (expressed in tonnes of CO₂e);
• At least one intensity ratio;
• Comparative information (except in the first year of reporting);
• Information on energy efficiency action and initiatives taken by the business during the year, and;
• Methodologies used in the calculations.

Quoted companies

Quoted businesses must prepare and provide information in their annual reports as follows:

• Annual GHG emissions, covering activities that the company is responsible for, including the combustion of fuel and the operation of any facility, plus the annual emissions from purchased electricity, heat, steam or cooling by the company for its own use;
• At least one intensity ratio;
• Comparative information;
• Information on significant energy efficiency action and initiatives taken by the business during the year;
• Methodologies used in the calculations;
• Underlying global energy use that is used to calculate GHG emissions in kWh, and;
• The proportion of energy use and emissions (in kWh) that relates to the UK.

What are the exemptions?

The Regulations allow certain exemptions from having to provide information on energy use and emissions:

• Subsidiary undertakings
  • Subsidiary undertakings that are included in a UK parent company’s energy use and emissions reporting on a group basis (prepared in accordance with the Regulations) do not have to present their own information in their individual annual report, although the annual report should say where the information is reported. This exemption requires the group’s reporting to be produced for a period ending at the same time as or before the subsidiary’s own year-end.  This exemption is not available to subsidiaries of non-UK parents.
• Low energy use
  • Companies and LLPs using less than 40 MWh per annum do not need to prepare and present energy use and emissions information, but the annual report must state that the information is not disclosed for that reason. This applies on a company-by-company basis rather than at a group level.
• Impracticality
  • Where providing all, or part, of the information would be impractical to the business, then the information may be omitted but the annual report must state what is omitted and why.  In such a case reasonable estimates are generally a better alternative to non-disclosure.
• Seriously prejudicial
  • Where disclosure would, in the opinion of the directors, be seriously prejudicial to the business, then it may be omitted, but the annual report must state that it is omitted for that reason.

Where should it be reported?

For quoted and unquoted companies, the energy use and emissions information must be included within the Directors’ Report.

For LLPs, the energy use and emissions information must be included as a separate ‘energy and carbon report’.

How to approach your energy use and emissions reporting?

Developing appropriate systems for your energy use and emissions reporting will support your business in ensuring the reporting requirements are met. Additionally, developing an appropriate system will help your business to maximise associated benefits, such as reducing energy costs, creating effective energy efficiency measures and improving transparency on energy efficiency for investors.

For larger companies; UK listed businesses or those required to produce a non-financial and sustainability information statement this information may be used in providing measures and KPIs for climate related disclosures.

Where can I get more guidance?

The HM Government published the Environmental Reporting Guidelines in 2019, and the FRC published a Thematic Review: Streamlined Energy and Carbon Reporting in 2021.

Implementation

We recommend that you take the following three key steps to develop an appropriate framework: