Energy and carbon compliance is becoming more and more complex for businesses with the growing amount of legislation and voluntary schemes within this space. As a business, you may have heard of or been affected by the Climate Change Levy, Mandatory Greenhouse Gas Reporting, the CRC Energy Efficiency scheme, ESOS, Taskforce on Climate-related Financial Disclosure, and other regulations. With this crowded landscape, it is no surprise the government is looking to streamline the process for businesses in a way that increases transparency, reduces administrative burden, raises awareness of energy efficiency and saves carbon at the same time. Given this is what the Streamlined Energy and Carbon Reporting (SECR) regulations set out to conquer; we ask whether the Government will achieve its objectives?
What will the new carbon and energy regulations look like?
The SECR is a package of regulations published recently by the department for Business, Energy and Industrial Strategy (BEIS), resulting from a series of consultations to streamline mandatory corporate reporting across 2017 whereby several different options were considered. The proposed solution includes:
- Increased scope of mandatory reporting – the number of companies required to report will extend to include both quoted and unquoted large companies. The definition of ‘large’ company is to be taken from the 2006 Companies Act whereby an organisation is large if two of the following are met: more than 250 employees; an annual turnover greater than £36mi; an annual balance sheet total greater than £18mi;
- Mandatory public carbon emissions and environmental disclosures which build upon the existing mandatory GHG reporting requirements and ESOS;
- The closure of the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme from the end of the 2018-19 compliance year;
- An increase in the Climate Change Levy (CCL) rates from April 2019 and the rebalancing of the CCL rates for gas and electricity.
The SECR framework will come into effect from April 2019 with the first public disclosures likely to emerge around springtime of 2020 to allow companies a full year to collect the required data.
Who will be required to report and what will businesses need to disclose?
The main changes will come for unquoted companies who will now need to start reporting in step with quoted companies who have been largely disclosing since the emergence of the Mandatory GHG (MGHG) regulation in 2013. The details of the SECR requirements and eligibility criteria are the following:
- Unquoted large UK registered companies and large LLPs will now have to report their UK energy use and associated scope 1 and scope 2 emissions (must include gas, electricity and transport), and at least one intensity metric. They will also be required to report the previous year’s figures for energy use and GHG emissions (except in the first year).
- Quoted companies will continue to report GHG emissions and an intensity metric with the added requirement of reporting global energy use under the new scheme. They will also be required to report the previous year’s figures for energy use and GHG emissions (except in the first year).
- Quoted and unquoted companies will also have to report the energy efficiency actions taken over the previous year. (It was suggested in the consultation phase that companies should be made to disclose their energy efficiency opportunities, but this was declined in the government response. This is, however, a requirement under ESOS, which will continue to run as usual.)
- Companies will need to disclose the required information in their Annual Report
- The companies using less than 40,000 kWh of energy in the reporting year will be exempt from reporting against SECR.
- All companies will be required to disclose the methodology used to calculate the new and existing disclosure requirements
Other important points on eligibility include:
- UK subsidiaries that qualify for SECR reporting, will not have to report where they are covered by their parent group’s report.
- If a subsidiaries’ parent company is not registered in the UK, but the subsidiary is, they would need to report against SECR. Companies that are not registered in the UK (non-UK incorporated) will not be required to report as they are not obliged to publish an annual report at Companies House.
- Other organisations outside the scope of SECR framework are those not registered as companies, like public sector organisations, some charities and some private sector .