Demystifying SECR

SECR is the new method for companies to report their carbon emissions. It is mandatory for

some but encouraged for all.

The full regulations are 152 pages and accessible here.

Voluntary reporting can include water, waste, biodiversity, materials and can include indirect effects such as that through your supply chain.

Who needs to report under SECR?

• Quoted companies of any size that are required to prepare a Directors’ Report under Part 15 of the Companies Act 2006.

• Large unquoted companies and large limited liability partnerships

• Turnover £36 million or more, Balance sheet total £18 million or more, number of employees 250 or more

There are some exceptions for defined ‘low energy users’ — defined as 40 MWh per year or less.

What is the process?

Step 1 Determine the boundaries of your organisation

Everything you own or operate should be reported on. For more complex organisational structures, you can define your boundaries based on financial or operational control.

Step 2 Determine the period for which you should collect data

Reporting is for 12 months and should be your financial year.

Step 3 Determine the key environmental impacts for your organisation

Mandatory reporting is for carbon emissions from your direct operations — gas, heating oil, electricity and fuel for any transport you operate.

Step 4 Measure

Measurements should be based on actual readings of gas and electricity meters or fuel purchased. Where there are gaps in data these can be estimated but your methods should be transparent.

Step 5 Report

You should the metrics (carbon for mandatory reporting), to what part of the business they apply and methodologies used. You should report an intensity ratio — normally (carbon emissions)/(turnover) is the simplest and most useful. You should compare to previous years. You should report on your efforts to reduce environmental impacts. You should set a target for future reductions.

In simple terms this is what you need to report:

Data from previous years must be included unless this is your first year of reporting.

Where do you report?

Companies in scope of the legislation will need to include their energy and carbon information in their Directors’ Report as part of their annual filing obligations.

Summary of mandatory reporting

Mandatory reporting is relatively simple as the table above shows. Report on your organisations’ gas, electricity and fuel used, an intensity ratio, methodology and any actions taken.

The government is encouraging certain voluntary reporting and many companies are doing this as part of their environmental strategy.

Voluntary reporting

Voluntary reporting can include water, waste, biodiversity, materials and can include indirect effects such as that through your supply chain. Carbon emissions can include business travel, staff commute, purchases of goods and services, use and disposal of products manufactured.

In general, businesses that go beyond mandatory reporting report on the carbon emissions of their operations that include the indirect effects noted above. This data is always harder to find because it is generally owned by others. Many companies are doing this anyway and would be classed as a carbon audit.

Carbon emission are defined in 3 Scopes:

Scope 1 — directly burned fuel (usually gas and heating oil plus any transport directly owned and operated)

Scope 2 — electricity

Scope 3 — everything else — upstream (supply chains), downstream (product use, disposal, water, waste), business travel, staff commute

Scope 1 and 2 are mandatory SECR reporting. Scope 1, 2 and 3 are encouraged and a Scope 1,2 and 3 audit would allow a company to see its total carbon impact — and offset to become net zero — if desired.