Streamlined Energy and Carbon Reporting (SECR) Explained

The UK’s new SECR carbon legislation is set to affect how large companies disclose their greenhouse gas (GHG) emissions and energy data. Find out whether your business will be affected - and what you need to do to ensure compliance.

What is SECR?

The Streamlined Energy and Carbon Reporting (SECR) policy is a sustainability framework implemented by the UK government’s Department for Business, Energy and Industrial Strategy (BEIS).

Mandatory for large, UK-based companies, the SECR builds on existing carbon and energy reporting frameworks, extending their scope by requiring organisations to share their carbon emissions and energy use in their annual reports. 

Qualifying companies will need to include SECR-aligned information in their Directors’ Report - or an equivalent Energy and Carbon Report for LLPs - for financial years beginning on, or after, 1 April 2019. 

If a company’s carbon emissions or energy use are considered to be strategically important, disclosures can instead be provided in a Strategic Report. An explanation of this decision must be outlined in the Directors’ Report.

Who must comply with the SECR framework?

Three types of businesses are affected by the new SECR regulation:

1. Quoted companies 
2. Large unquoted companies
3. Large Limited Liability Partnerships (LLPs)

Unquoted companies or LLPs are defined as ‘large’ if they meet at least two of the following three criteria:

• An annual turnover of £36 million
• A yearly balance sheet of £18 million
• 250+ employees

LLPs and large unquoted companies are exempt from SECR reporting if they can demonstrate their energy use during the reporting period is below 40 MWh.

Public bodies are not required to comply with SECR. However, they are subject to other carbon reporting legislation. Organisations undertaking public activities - such as charities, not-for-profits and academies - will need to check whether they meet the qualifying criteria.

Private sector organizsations which fall outside this scope are encouraged to voluntarily report on their carbon emissions and energy use.

Why has the SECR been implemented?

Carbon legislation has been ramping up worldwide - in the EU, the Carbon Border Adjustment Mechanism (CBAM) has been implemented and the Corporate Sustainability Reporting Directive (CSRD) affects large companies, who will need to provide more detailed reporting on sustainability issues. In the United States, the Securities and Exchange Commission (SEC) has proposed legislation requiring publicly-listed companies to disclose their carbon emissions - as well as more detailed information on climate risks.

In the UK, the SECR is the main carbon reporting framework, requiring companies to share energy use and carbon emissions information. The SECR’s aim is to create a more even playing field for energy and emissions reporting, provide greater transparency for stakeholders and increase companies’ awareness of energy costs, which should enable improvements in energy efficiency and carbon emissions reduction.

How can companies comply and what will they need to report?

The SECR outlines one set of requirements for quoted companies, and another for LLPs and large unquoted companies.

Under SECR, quoted companies must report:

• Global Scope 1 & 2 GHG emissions 
• Underlying global energy use for the current reporting year
• Energy use and GHG data from the previous reporting year
• At least one intensity ratio - which compares emissions data with a suitable financial or business metric
• Energy efficiency actions taken
• Methodology used - ideally, a globally-recognised independent standard such as the GHG Protocol Corporate Accounting and Reporting Standard 

Under SECR, large unquoted companies and LLPs must report:

• UK energy use and associated GHG emissions
• Energy use and GHG data from the previous reporting year
• At least one intensity ratio 
• Energy efficiency actions taken
• Methodology used

The SECR recommends companies go beyond the minimum requirements and voluntarily include any other material source of energy use or GHG emissions outside these boundaries. External verification is encouraged as best practice, but it is not mandatory.

Although disclosing Scope 3 emissions is a voluntary process, the SECR strongly advises companies to measure and share this information, as this helps provide a more accurate picture of an organisation’s impact. Using science-based targets - and adopting recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) - is also encouraged.

The SECR also contains a ‘comply or explain’ clause, which allows organisations to exclude information when it is not practical or feasible to collect it - as long as companies can explain what information has been omitted and why. In future reporting, companies should take steps to fill in any material gaps from previous years.

Measuring your greenhouse gas (GHG) emissions is a fundamental step towards ESG leadership and carbon risk management.

CarbonChain helps companies fill critical data gaps to ensure your organisation complies with the SECR.

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