Colin Lillicrap

Is Your Company Prepared For The SECR Reporting Deadline?

a vector illustration of the greenhouse effect

The SECR legislation that came into force on 1 April 2019 requires qualifying* large companies to report their total energy consumption and greenhouse gas emissions for the first complete financial year after that date. Companies with financial year from April to March must now prepare to lodge their annual report and accounts at Companies House for the financial year ending March 2020 or thereafter. They must include in their Directors’ report as a minimum the following mandatory information.

Quoted companies

Large unquoted companies and LLPs

Annual GHG emissions from activities for which the company is responsible including combustion of fuel and operation of any facility; and the annual emissions from the purchase of electricity, heat, steam or cooling by the company for its own use

UK energy use (as a minimum gas, electricity and transport, including UK offshore area)

Underlying global energy use

Associated greenhouse gas emissions

Previous year’s figures for energy use and GHG emissions

Previous year’s figures for energy use and GHG emissions

At least one intensity ratio

At least one intensity ratio

Energy efficiency action taken

Energy efficiency action taken

Methodology used

Methodology used

 

*Qualifying companies

The definition of “large” is the same as applies in the existing framework for annual accounts and reports, based on sections 465 and 466 of the Companies Act 2006. The qualifying conditions are met by a company or LLP in a year in which it satisfies two or more of the following requirements:

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

Why is this important and is SECR mandatory?

a vector illustration of the greenhouse effect

Global warming is caused by greenhouse gases in the atmosphere which trap heat. The UK government has set a target for the UK to achieve net zero carbon by 2050. While there can still be emissions of greenhouse gases these will need to be offset by measures to remove the equivalent amount of carbon from the atmosphere. SECR provides directors with essential information to plan how they are going to reduce emissions and achieve net zero by 2050.

Benefits of SECR

There are direct benefits to your organisation from measuring and reporting on your environmental performance:

  • Many organisations are increasingly seeking information on the environmental performance of their suppliers.
  • Investors, shareholders and other stakeholders are increasingly requesting better environmental disclosures in annual reports and accounts.
  • SECR provides KPIs to demonstrate to your customers a link between environmental and financial performance
  • A Defra sponsored study provided robust evidence that environmental management systems generally delivered cost savings and new business sales.
  • Strengthen your green credentials in the marketplace.
  • SECR provides a base for assessing the risk to your business from climate change.

Steps in the reporting process

Step 1: Determine the boundaries of your organisation.

Boundaries can be set according to:

Financial control boundary: The organisation reports on all sources of environmental impact over which it has financial control.

Operational control boundary: The organisation reports on all sources of environmental impact over which it has operational control.

Equity share boundary: The organisation accounts for GHG emissions from operations according to its share of equity in the operation.

Step 2: determine the period for which the organisation should collect data.

The reporting period should be for 12 months and ideally should correspond with the financial year to allow easy comparison of financial and environmental performance.

Step 3: Determine key performance indicators.

SECR is focussed on GHG emissions. There is a mandatory requirement to calculate intensity ratios based on relevant normalising factors such as turnover or units of production for example tonne CO2 equivalent per £m turnover or tonne CO2 equivalent per unit of production.

Step 4: Measuring

For SECR we are concerned with measuring the total energy consumption and then using government approved conversion factors to calculate the GHG emissions. It should be noted that the new legislation now requires both quoted companies and large unquoted companies and LLPs to report both total energy consumption and GHG emissions. Electricity and gas consumption should ideally be obtained from meter readings and avoid estimated readings. For transport litres of fuel purchased should be obtained where possible for example from fuel card records. For grey fleets it is often necessary to use records of mileage travelled on company business and estimate the fuel consumption using any available information on the vehicles used. Gas oil use can be determined from delivery records. LPG may be recorded as litres or kg delivered. Identifying process energy within the total depends on the sub-metering available.

Step 5: Reporting

Guidance on environmental reporting including SECR can be found here

Large companies need to report:

  • UK energy use (to include as a minimum purchased electricity, gas and transport).
  • Associated greenhouse gas emissions.
  • At least one intensity ratio.
  • Previous year’s figures for energy use and GHG emissions (except in their first year).
  • Information about energy efficiency action taken in the organisation’s financial year.
  • Methodologies used in calculation of disclosures.

 

There is no set format for what appears in the Directors’ report but a reporting template is included in chapter 2 of the guidance. The template for unquoted companies and LLPs  is reproduced in the appendix. The template for quoted companies is very similar.

Group Reporting

Organisations reporting at group level must take into account any subsidiaries included in the consolidation which are quoted companies, unquoted companies or LLPs. However, there is an option to exclude from the report any energy and carbon information relating to a subsidiary which the subsidiary would not itself be obliged to include if reporting on its own account.

Voluntary Environmental reporting

This document covers only mandatory reporting under the SECR legislation. For further guidance on voluntary environmental please refer to  ‘Environmental Reporting Guidelines: Including streamlined energy and carbon reporting guidance March 2019 (Updated Introduction and Chapters 1 and 2)’ using the link above.

How we can help your business comply

Colin Lillicrap Associates Ltd has been carrying out energy audits and advising large businesses on decarbonising their operations since 2014 under the Energy Saving Opportunities Scheme (ESOS).  ESOS and SECR require the same data to be collected and processed but there are significant differences in the qualifying criteria and reporting requirements. Based on our years of experience of advising companies on energy and cost savings we have developed a template for rapidly process your energy consumption for all end uses and providing the outputs directors need to prepare their report to comply with SECR.

Additional services: Using the information we need to gather for SECR we can provide the following additional services:

  • Produce energy profiles to show where energy is used
  • Identify energy and cost saving measures and rank them by simple payback of where appropriate life cycle cost analysis
  • Check your business is on the best tariffs electricity, gas and water
  • If you run a fleet of company vehicles we can review your fleet management and advise on the transition to electric vehicles in the coming years

Call us on 01442 873439 for a competitive quote

 

 

 

 

 

»

 

Call 01442 873439 to speak to our CIBSE certified experts or
email [email protected]