There’s a big shake-up in energy regulations coming into force next April when the proposed Streamlined Energy and Carbon Reporting (SECR) scheme is scheduled to start.
This will affect approximately 12,000 large companies, including limited liability partnerships, who will be required to record carbon emissions, energy use and energy efficiency actions in their annual reports.
With the clock ticking on the introduction of this big regulatory change, it’s time for large enterprises to prepare.
What are the key features of SECR?
- Extends existing mandatory Greenhouse Gas Emissions reporting (MGHG) rules for quoted companies.
- Introduces mandatory carbon and energy reporting for far greater numbers of large companies, including both quoted and unquoted companies. Currently, around 1,200 companies are required to report under MGHG, whereas the new regulations will affect around 12,000 businesses.
- Covers reporting on UK energy usage across the entire business, including electricity, gas and transport.
- Builds on the Energy Saving Opportunities Scheme (ESOS), which is expected to continue
- Closes the CRC scheme at the end of the current compliance year (2018/19)
- There is no revenue impact to SECR, but CCL rates will increase substantially from April 2019 to offset lost tax from the CRC.
Who is required to report and what information must be disclosed?
- Quoted UK companies must continue to report GHG emissions and an intensity metric across their UK business, but there’s an additional requirement to report their annual energy consumption, plus their global energy consumption and emissions, where this is practical.
- Other large UK companies (both incorporated unquoted companies and limited liability partnerships) also fall within scope if they have more than 250 employees, or an annual turnover of more than £36m and an annual balance sheet of more than £18m). They must report UK-wide GHG emissions and at least one intensity metric, which expresses the company’s emissions in relation to a quantifiable factor associated with the company’s activities.
- All companies must report energy efficiency actions taken during the reporting year, differing from ESOS, which requires participants to report energy saving opportunities. There is potential to use ESOS data to support the compliance process.
- Organisations that aren’t registered as companies, such as charities and public sector organisations fall outside the scope of SECR.
- UK subsidiaries, who meet the eligibility criteria, but are covered by a parent group’s report, will be exempt, unless the parent group is registered outside the UK.
- If it is impractical for companies to collect and publish the reporting data, or where this would prove ‘seriously prejudicial’, they may be exempt from SECR.
- Companies that use less than 40,000 kWh of energy during the reporting year will be exempt.
How do I prepare for SECR?
The legislation is currently before Parliament and final guidance is expected in January 2019, but there is already plenty of detail about what’s likely to be required. Here’s the factors you should be considering in your compliance plan to ensure that you are fully prepared.
- Act promptly to prepare the systems and processes needed for information collection and disclosure. This is particularly important for the many newcomers to environmental reporting. Those already subject to MGHG should understand the additional requirements of SECR.
- Understand the budget and any cost implications, particularly from the abolition of the CRC scheme and much higher CCL rates. While existing CRC participants (with no CCL exemptions or discounts) could be better off from 1 April 2019 when they will no longer need to purchase CRC allowances, they must budget for overlapping charges of final CRC payments and new increased CCL rates.
- Centralise and make full use of existing data-collection processes. You may already have data collection systems in place for existing compliance requirements, e.g. ESOS and Carbon Disclosure Project (CDP). Centralise these processes so that you don’t duplicate effort.
- Communicate with your stakeholders. SECR is a board-level issue, but it will also require involvement from other areas and levels of the business, e.g. operations, FM and energy management, plus external stakeholders, such as energy providers. It’s important to define roles and responsibilities to ensure that the compliance timetable is met and the cost implications are fully understood and communicated.
