Streamlined Energy and Carbon Reporting (SECR) is the U.K.’s sustainability reporting framework that covers GHG emissions and energy usage to encourage improved energy efficiency. The U.K. overall is a leading global market in GHG emissions accounting and disclosure as it has the strongest maturity worldwide. SECR is a prime example of this.
SECR, which has a greater focus on carbon and energy, builds on the U.K. Companies Act landmark move, globally requiring companies to report on GHG emissions (since 2013). SECR significantly streamlines requirements to reduce the reporting burden while also improving the type and quality of reported information. It is part of a long-term view of aligning with TCFD reporting for all U.K. businesses.
SECR equips businesses with the guidance needed to create comprehensive and comparable reports. As a result of this improved transparency, stakeholders and the general public can use this information for relevant decision-making.
But what is the importance of SECR, and why do U.K. businesses need to comply? We’ll review what U.K. corporations can expect when preparing an SECR disclosure and some historical context behind its proposal. Our guide highlights important parts of SECR; however, businesses can read the official guidance from HM Government for more information.
Who Needs to Report Under SECR?
SECR requires the following companies to submit disclosures:
- All quoted companies of any size
- Large unquoted companies incorporated in the U.K. (including charitable companies)
- Large limited liability partnerships (LLPs)
A “quoted company” is one that’s officially listed on the main market of the London Stock Exchange, listed in a European Economic Area state, or admitted to dealing on NASDAQ or the New York Stock Exchange.
Sections 465 and 466 of the Companies Act 2006 define “large” companies as ones that fulfill at least two of the following criteria:
- A turnover of at least £36 million
- A balance sheet of at least £18 million
- At least 250 employees
The following organizations are exempt from SECR disclosure requirements:
- Low energy users
- Organizations defined as a public body
- Organizations incorporated outside of the U.K.
- Private sector organizations
Low energy users are organizations that use 40MWh (megawatt hour) or less over the financial year. “MWh” refers to the usage of 1,000 kilowatts (Kwh) in an hour — 40MWh is roughly equivalent to the amount of energy consumed by about 14 British homes in a year.
This measurement considers all energy usage from electricity, transport fuel, and gas in the U.K. companies are responsible for.
SECR also exempts organizations defined as public bodies from reporting. However, organizations or parts of an organization may need to submit reports even if they are doing public or not-for-profit activities. These organizations should verify whether or not they meet exemption requirements.
Organizations incorporated outside of the U.K. and private sector organizations are also not required to submit reports. Exempt organizations are encouraged to voluntarily participate in managing their energy efficiency and supporting the U.K.’s nationwide efforts.
Why Was SECR Introduced?
The U.K. introduced SECR to enhance transparency around business energy and carbon use for stakeholders, improve efficiency and productivity for U.K. companies, and work more harmoniously with other U.K. energy efficiency measures.
Analyzing energy, in addition to carbon usage, provides a more comprehensive picture of a company’s performance compared to reviewing only energy or only emissions. Retaining this level of information can help companies create more accurate and thorough emissions management and other related efforts.
Standardization also creates a level playing field among these organizations since reports will be comparable. This allows for more fair and accurate comparisons from stakeholders and the general public.
What Are SECR Reporting Requirements?
SECR requires companies to provide information on energy usage, including the calculation methodology and how it compares to the previous year.
Below is a broad overview of the information required for SECR reports.
- Energy use, including gas, purchased electricity, and transport fuel
- GHG emissions reported in tonnes of carbon dioxide equivalent (CO2e)
- Methodology used to make calculations for emissions and energy use
- At least one intensity ratio comparing emissions to a business metric
- A narrative description of efforts taken to improve the company’s energy efficiency during the financial year
- Previous years’ figures for GHG emissions and energy use
A business must determine the organization's boundaries and what parts it must report on. This is especially relevant for companies with complex structures. Below are boundaries an organization can use.
- Financial control boundary means that a company reports on all sources of environmental impact that it has financial control over
- Operational control boundary means that a company reports on all sources of environmental impact that it has operational control over
- Equity share boundary means a company accounts for GHG emissions from operations based on its equity in the operation
- Climate Disclosure Standards Board (CDSB) Framework aligns environmental and social information with the boundaries used for financial reporting
The Financial Reporting Council (FRC) also created the 2019 SECR taxonomy to reflect the new reporting requirements. This update allows companies to tag SECR data and improve transparency and accessibility.
Additionally, disclosures must be accessible and easily understood by stakeholders. Other requirements begin to differ based on the type of organization — we’ll go over some of those differences in the next section.
Omitted Information
SECR allows companies to omit information that falls under the following categories. However, companies are required to include an explanation for omitted information.
- Disclosing the information would be seriously prejudicial to the organization’s interest. This reasoning should be used under exceptional circumstances, like an acquisition or restructuring.
- Energy and carbon information are not practical to obtain. SECR recommends also including the materiality of the information and the actions the company is taking to obtain that information.
Organizations can use estimates when they cannot obtain exact figures. Companies may be questioned by the FRC as a result of omitted information.
Voluntary Information and Actions
Guidance from HM Government includes recommendations for additional voluntary information and actions for more robust reporting. Below are some examples of these recommendations.
- Alignment with Task Force on Climate-related Financial Disclosures (TCFD) recommendations if interested in reporting forward-looking financial risks and opportunities resulting from climate change
- External verification/assurance to review the consistency, completeness, and accuracy of the information in the disclosure
- Reporting scope 3 emissions or specific scope 3 emissions (depending on the type of organization), especially if it is a material source of emissions
- Setting forward-looking science-based emissions reduction targets that go beyond requirements to report on the current and previous financial year
- Determine the materiality of emissions to gain a better understanding of the business's impact on the environment
HM Government includes these and more recommendations to provide companies with best practices to follow. These additions can enhance reports and provide stakeholders with more extensive information useful for decision-making.
How Do SECR Requirements Differ Between Types of Organizations?
Disclosure requirements for energy usage and GHG emissions differ between quoted companies and large unquoted companies incorporated in the U.K. and LLPs.
Quoted Companies
Quoted companies must report GHG emissions, energy use, and more. Below is a summary of those requirements.
- Annual global emissions from activities the company is responsible for, including combustion of fuel and the operation of any facilities in CO2e (also known as scope 1 emissions)
- Annual emissions from the purchase of heat, steam, cooling, or electricity by the company for its own use in CO2e (also known as scope 2 emissions)
- Methodologies used in calculations
- At least one intensity ratio
- Previous year’s figures for GHG emissions and energy use
- Underlying global energy use used to calculate GHG emissions in kWh, including the previous year’s figure
- Information about energy efficiency action taken during the organization’s financial year
- Proportion of the company’s energy consumption and emissions related to emissions and energy consumption in the U.K. (including offshore area)
When reporting on GHG emissions, quoted companies must ensure that the GHG accounting approach used covers the required emissions activities they are responsible for and must report on.
The GHG emissions reported must also align with the requirements of the Directors’ Report. HM Government states a strong preference for energy and carbon reports that align with the boundaries of financial statements.
Quoted companies must report on emissions from the following GHGs:
- Carbon dioxide (CO2)
- Methane (CH4)
- Nitrous oxide (N2O)
- Hydrofluorocarbons (HFCs)
- Perfluorocarbons (PFCs)
- Sulfur hexafluoride (SF6)
These companies are also encouraged to consider reporting on nitrogen trifluoride (NF3), especially if it is material to the company.
Quoted companies must also make clear if reporting emissions from activities they are responsible for results in either of the following scenarios:
- Reporting on energy use and GHG emissions from operations not included in their statements
- Not reporting on energy use and GHG emissions from certain operations covered by the consolidated financial statement
Explanations of omitted or additional inclusions of emissions data should be clear and include if and how the information differs from operations within the consolidated financial statement.
Large unquoted companies incorporated in the U.K. and LLPs
Disclosures from large unquoted companies and LLPs include U.K. energy use and associated GHG emissions. Offshore undertakings must disclose energy use and emissions for the U.K. and offshore areas. Below is a summary of requirements for large unquoted companies incorporated in the U.K. and LLPs.
- U.K. energy use, including purchased electricity, gas, and transport at minimum
- Associated GHG emissions in CO2e as a result of the total U.K. energy use
- Methodologies used in calculations
- At least one intensity ratio
- Previous year’s figures for GHG emissions and energy use
- Information about energy efficiency action taken during the organization’s financial year
At a minimum, these companies must report these figures related to the annual quantity of energy consumed:
- In the U.K. resulting from the purchase of electricity by the company for its own use, including transportation
- From stationary or mobile activities involving the combustion of gas that the business is responsible for
- From transportation where the organization is responsible for purchasing fuel for business purposes
These companies can also voluntarily report information, especially if they significantly affect their emissions or energy. Some examples include:
- Unconsumed energy that the organization does not use or supplies to a third party
- Energy consumed outside the U.K. (unless the business is an offshore undertaking)
- Fuel associated with train travel of a company’s employees where the company does not operate the train
- Fuel associated with the transportation of goods where the business subcontracts a firm or self-employed individual to undertake the work for the business
SECR FAQs
There are many aspects to understand when complying with legislation like SECR. Some common questions include:
How Is SECR Enforced?
The Conduct Committee of the FRC is responsible for monitoring compliance of both reports and relevant accounts based on requirements from Part 15 of the Companies Act 2006. The committee can:
- Launch investigations if they determine companies have not provided relevant disclosures
- Apply for a declaration that annual reports or accounts don’t comply with requirements and, as a result, require a revised report and/or set of accounts
Companies House cannot accept accounts for companies and LLPs that don’t meet the requirements of the Companies Act 2006. Companies that submit reports after the filing deadline are liable for civil penalties and any action taken against directors or LLP members.
When Was SECR Introduced?
SECR was first introduced in April 2018 when the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 came into force.
What Is the Difference Between ESOS and SECR?
ESOS audits only energy consumption rather than energy and GHG emissions like SECR. ESOS also includes different scopes of businesses that are mandated to comply.
ESOS is the U.K. energy assessment scheme introduced in 2014 to improve energy efficiency in the U.K. Qualifying businesses must submit information on total energy consumption, energy efficiency, and energy savings opportunities.
Where Do Businesses Include SECR Disclosure Information?
SECR disclosures must be included in the company’s Directors’ Report or similar energy and carbon report. These must be filed with Companies House. LLPs will need to file a separate energy and company report and submit it to Companies House.
Businesses can also include SECR disclosure information in strategic reports if SECR is embedded in a company’s strategy. However, companies must explain this decision in the Directors’ Report.
How Does Subsidiary and Group-Level Reporting Work?
Group-level reporting includes disclosures for parent companies and their subsidiaries. This can affect how parent and subsidiary companies submit their disclosures.
For example, subsidiaries must take into account energy usage from their parent company and subsidiaries (if included in a group report) to seek an exemption. Subsidiaries may not be required to include SECR disclosure information in their reports if it is already included in a group-level report.
Parent companies can omit a subsidiary’s information if SECR doesn’t require the subsidiary to report if it were disclosed independently.
How Can Businesses Improve SECR Reporting and Compliance?
Businesses can better prepare for SECR reporting by training staff, measuring their emissions, and using enterprise-level tools like Climate Management & Carbon Accounting Platforms (CMAPs).
Staff training and education can help team members get aligned and informed on how and why they need to assist with SECR reporting. Explaining what type of information, where it comes from, and who’s responsible for collecting are a few things businesses can do to help their team get started.
Implementing methods to measure and analyze emissions and energy can help streamline the process. SECR reporting may include trial and error before finding the best process.
Using a comprehensive tool like CMAPs can automate the tedious aspects of sustainability disclosure and information requests.
The right software can give businesses back the time they need to spend on building a decarbonization plan, educating stakeholders, and implementing initiatives to align companies with new requirements.
GHG emissions reporting is becoming more prevalent as more countries decide to take action to mitigate climate change. This major step forward results in regulations like SECR that require a level of reporting some companies have not previously done.
Persefoni’s SaaS platform features an intuitive solution that can support all data points required for SECR. The tool can tailor a plan to source data and calculate your footprint, see trends data related to your company’s output, and gain insights on how your company can reduce its impact.
Corporations of all sizes can use Persefoni’s platform to automate tedious tasks and instead dedicate more resources to meeting compliance and taking action. This can range from small companies calculating their footprint for the first time to large companies that need support expanding into scope 3 reporting.
Learn more about Persefoni’s all-in-one carbon accounting platform and how your business can use it to prepare for SECR reporting.
