Streamlined Energy and Carbon Reporting regulations 2018
As SECR comes into effect on 1st April 2019, carbon and energy reporting will become mandatory for thousands of UK businesses for the first time.
New streamlined environmental legislation. More companies will now have to report. Don’t get caught out
The long-awaited rationalisation of the environmental reporting landscape is here. New Government legislation for companies and LLPs will require action to ensure compliance on environmental disclosure; other changes will alter how companies play climate change taxes.
New carbon reporting regulation – key facts
Whether you agree that the Government consultation to simplify environmental disclosure and compliance has met its aims or not, the facts are clear:
- Upgraded environmental reporting legislation came into force in April 2019 and many large organisations will now need to up their game
- ESOS is here to stay and large organisations need to comply with phase 2 by the end of 2019
- CRC scrappage at end of 2018-19 is confirmed, but ramped up Climate Change Levy (CCL) will take its place and impact more business than before
Upgrades to environmental reporting legislation
The snappily named: The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Reporting) Regulations 2018, changes the breadth of compulsory environmental reporting for organisations that are already disclosing information to stakeholders and scoops up a raft of new businesses that haven’t reported on environmental performance to date.
Without doubt, environmental and investor indices, think tanks and media channels will be on hand to commentate on the best in class, and worst performing efforts across the next 24 months as first reports come to light.
Which organisations need to act on the requirements of SECR?
Companies required to publicly disclose GHG emissions and environmental data will include both large quoted and unquoted companies. This will include Limited Liability Partnerships (LLPs)
UK subsidiaries covered by parent company
UK subsidiaries that qualify for SECR reporting, will not have to report where they are covered by their parent group’s report.
Organisations not registered in the UK
If a subsidiaries’ parent company is not registered in the UK, but the subsidiary is, they would need to report
The definition of a ‘large’ company is
According to the Companies Act 2006, a large company is defined if two of the following are met
More than 250 employees
Annual turnover greater than £36m
Annual balance sheet total greater than £18m
The SECR framework came into effect in April 2019 and the first public disclosures is likely to emerge around springtime of 2020 allowing companies a full year to collect the required data.
Streamlining environmental compliance
Has the new legislation met its objectives?
Any change in regulation comes with its potential positive and negative outcomes, and the SECR is no different. We highlight a few of the key impacts to businesses along with their benefits and challenges.
SECR compliance criteria
What you need to know
Large unquoted companies
- Large unquoted companies that haven’t been captured by environmental reporting legislation before 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.
Companies reporting mandatory GHG
- Large quoted companies already captured by the Mandatory GHG Regulation 2013 will continue to report scope 1 and 2 emissions and an intensity metric (as per the regulation) with the added requirement of reporting global energy use under the new scheme.
- There are many variations
Energy efficiency actions
- For the first time both quoted and unquoted companies will also have to report the energy efficiency actions taken over the previous year. This may be very straightforward for organisations already reporting their energy opportunities through ESOS compliance
Exemption provision has been implemented for companies using less than 40,000 kWh of energy in the reporting year.
ESOS to remain
As most large organisations know, ESOS (the Energy Savings Opportunities Scheme) is the requirement to audit the energy consumed in UK buildings and vehicles every four years. The SECR consultation outcome has confirmed that ESOS remains as per the original guidance and proposed deadlines.
The qualification date for ESOS energy audits is the 31st December 2018 and compliance date the 5th December 2019.
For more information on what is required for phase 2 read our guidance.
Need support with ESOS compliance?
CRC scrappage and CCL increase
Since 2010 over 1,800 organisations with significant energy usage have been incentivised to reduce their emissions through the Carbon Reduction Commitment (CRC) scheme. This has required them to quantify, report and purchase carbon allowances sufficient to cover their electricity and gas supplies on an annual basis.
The SECR consultation has confirmed the scrappage of the CRC scheme, however energy efficiency action will instead be incentivised via the increase in Climate Change Levy (CCL).
The impact of increasing CCL will be felt more widely than the original CRC requirements as CCL is paid by all organisations and is levied via energy billing at individual site level.
In addition, the currently unequal ratio of CCL charge per unit kWh electricity compared to gas will be rebalanced over the coming years, moving from a ratio of 3:1 to 1:1 through increases in the cost per unit gas CCL. This is designed to incentivise the move away from natural gas and towards electricity as the UK grid decarbonises.
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How can ESOS help you to get ready?
When to start work on the SECR requirements?
The sooner organisations start to get prepared for the new requirements the better. Data collection for carbon emissions disclosures and ESOS compliance can take organisations months, if not years to get right. Getting the procedures and systems in place as early as possible is the key to ensure information is accurate and compliance is achieved in good time.
We help you stay up to date with the legislation
SECR readiness and compliance support
Our team of reporting experts will work with your organisation to understand its eligibility under the newest reporting and disclosure regulations. Over the course of 2018-19 and beyond we can support your organisation to get ready for your first carbon emissions disclosure, engaging with external stakeholders to ensure disclosures information meets their increasing appetite for transparency and granularity across sustainability topics.
Our energy compliance experts will work with your organisation to ensure compliance with ESOS phase 2 through energy audits or the construction and roll out of a compliant ISO 50001 energy management system.
Not sure if your organisation qualifies for the European equivalent of ESOS (called Article 8 Energy Directive compliance?); work with our team to evaluate your eligibility status and routes to compliance as required.
CCL impact support
Will CCL charge ramp up swiftly for your organisation? Not sure? If your organisation wasn’t captured by CRC in the past and relies on gas usage, your energy costs may be about to escalate. Work with our team of energy experts to forecast the likely increase in costs over the course of the coming years and design strategies to mitigate these costs.
Not sure if your organisation is affected by SECR or about the specific changes to legislation? Unclear where to start?