Streamlined Energy & Carbon Reporting – the key points
The Government has a number of policies in place to encourage organisations to invest in energy efficiency and drive decarbonisation. Coming into effect in April 2019, The Streamlined Energy and Carbon Reporting (SECR) is part of a package of changes announced in the March 2016 budget which aims to simplify the current policy landscape.
Last month, the Department for Business, Energy and Industrial Strategy (BEIS) published the Government’s response to the consultation on SECR, which closed in January last year. An impact assessment has also been published. The government response and impact assessment can be found here.
The current policy landscape
Presently, the policy landscape is complex and hard to navigate, with companies facing a significant administrative burden by the overlapping suite of requirements.
To summarise the key existing policies:
- The CRC Energy Efficiency Scheme, introduced in 2016, requires over 5000 eligible business and public sector organisations to annually report UK energy use and purchase allowances to cover their carbon emissions. All emissions are published by the Environment Agency. The current phase of the scheme covers emissions until March 2019, after which it will be abolished.
- The Energy Savings Opportunity Scheme (ESOS) requires ‘large’ undertakings to audit their energy use. Whilst this includes elements of reporting, it does not include public disclosure.
- Mandatory GHG reporting (MGHG reporting) already applies to all UK quoted companies, but only delivers transparency of carbon data, and only for around 1000 companies.
- Many businesses voluntarily participate in reporting schemes such as the CDP, TCFD, and use international standards such as ISO 50001, GHG Protocol, ISO 14064-1, EU Emissions Trading System (EU ETS), and Climate Change Agreements (CCAs). Some of these publish emission data, however, this is often done at the level of installations (EU ETS), or target units (CCA), not whole businesses.
Despite the number of reporting requirements, environmental data included in companies’ strategic reports remain far from a comprehensive set of corporate energy and emissions data. The outcomes of the consultation suggested that this package of policies is too complex and that more could be done to bring together and disclose information.
In comes the SECR
In response, the UK government has proposed to introduce a Streamlined Energy and Carbon Reporting system through reforms that reduce the administrative burden of compliance when compared to the current landscape.
The SECR will require large UK companies to publicly report on their energy use, carbon emissions and energy efficiency actions. It will replace the reporting aspects of the CRC, with a simple framework which builds on and combines elements of existing mechanisms such as MGHG. It also proposes to include a narrative section on energy efficiency actions taken in the financial year and cites the potential to use ESOS outputs in the streamlined reporting approach.
Crucially, it will be implemented through the mechanism of directors reports within annual company accounts, rather than requiring additional filings with Companies House or another regulator (as is currently the case).
In the recently published Impact Assessment, the Government estimates that the simplification package is likely to save business £20m per year in administration costs, and cut non-traded greenhouse gas emissions by 5 million tonnes, and traded emissions by 7.9 million tonnes. It is one of the largest carbon saving measures in the Clean Growth Strategy.
Who will qualify for the SECR?
The new SECR reporting framework will have a much wider remit than the existing CRC and is estimated to extend the number of companies that report the SECR information from around 1,200 to 11,900.
- It will apply to all quoted companies.
- It will apply to large UK incorporated unquoted companies which meet certain criteria within a financial year. These are having at least 250 employees or annual turnover greater than £36m and an annual balance sheet total greater than £18m.
- To reduce the complexity and administrative burden, UK subsidiaries that qualify for SECR will not be required to report if they are covered by a parent’s group report.
- There is also potential for voluntary participation.
Is Geoengineering the answer to climate change?
Why sustainability should be the business strategy – reflections on PwC’s latest CEO Survey
5 ways to improve your materiality assessment