So, you have heard that organisations are required to prepare an mandatory Energy and Carbon Report. so, who is required to report, what does it consist of & how can you complete your report?
This article has all those answers on the Streamlined Energy and Carbon Reporting (SECR), which is a mandatory requirement for certain organisations within the UK & outline five simple steps for the completion of your Energy and Carbon Reporting, which will make your reporting easier and faster
What is the legislation?
Firstly, what is the legislation which requires the mandatory reporting of energy usage and carbon emissions in the UK.
The energy and carbon reporting is required under the Companies Act 2006 through two Regulations with the first: The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 applied the reporting for Quoted companies.
The second Regulation: The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 expanded the requirements to include large unquoted companies and large Limited Liability Partnerships (LLP). These organisations will be required to prepare an energy and carbon report within their Directors’ (or Partners) Report and to submit them as part of their reported Accounts to Companies House.
Who are required to report?
This new, mandatory energy and carbon reporting applies to quoted companies, large Limited Liability Partnerships (LLP) and large unquoted companies. Quoted companies have already been required to report aspects of their energy consumption and carbon emissions in years prior to 2019. However, for large Limited Liability Partnerships (LLPs) and large unquoted companies, this will be their first exposure to this new reporting requirement.
It is important to understand, what is meant by “large” for unquoted companies and LLPs.
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
It is anticipated that approximately 12,000 organisations are affected by this legislation.
What must be reported?
The Energy and Carbon Reporting requirements can be broken down into six key areas:
- Energy use from electricity, fuel and transport, which is a global requirement for Quoted Companies & for large Limited Liability Partnerships (LLP) and large unquoted companies is limited to the UK only.
- Scope 1 and 2 emissions are covered -These relate to Scope 1 emissions, which are the direct emissions from controlled or owned sources including the combustion of fuel and operation of facility & Scope 2, which are indirect energy emissions from generation of purchased energy. Scope 3 remains voluntary, which relates to emissions from your supply chain.
- Previous year’s emissions (in CO2e) and energy consumption (in kWh).
- An intensity ratio (or metric), which must be linked to the activity of the organisation, such as Turnover in £100,000 or units of production.
- A narrative on energy efficiency, which can include policies, energy saving activities & current and future projects.
- The methodology used to calculate the carbon emissions must be a recognised independent standard, such as GHG Reporting Protocol – Corporate Standard, ISO 14064-1:2018, Climate Disclosure Standards Board & The Global Reporting Initiative Sustainability Reporting Guidelines.
How can I report? – 5 Steps to complete your Reporting
To help you with completing your Energy and Carbon Reporting, I have outlined five simple steps for the completion of your Energy and Carbon Reporting.
Step 1: Review Requirements & Scope
The first step is to review the SECR requirements and scope for your organisation by obtaining the Regulations and Guidance & undertaking a review of your company structure for any companies, which may met the criteria for a “large” company or LLP.
From there you can scope out the reporting requirements including whether you want to voluntarily report Scope 3 emissions.
Step 2: Undertake a Gap Analysis
The next Step is to undertake a Gap Analysis by reviewing your current energy and carbon reporting and comparing against SECR requirements. That way, you can identify any gaps including any data held, intensity ratio or methodology & prepare an Action Plan to address any gaps.
Step 3: Data Management
The third step is to take the scope and Action plan and apply it to your data management. This will have sub-steps to identify current data & owners and to project plan the data management including internal reporting deadlines and milestones. In this step, you will need to collect energy efficiency information and for intensity ratio & identify and follow agreed methodology. Within the overall data management, it is important to verify the data to ensure it is correct and accurate.
Step 4: Apply agreed Methodology
Step Four is the application of your agreed methodology using relevant UK or international conversion factors to allow for the completion of your calculations for energy consumption and carbon emissions. It is important to ensure that you have secure storage of all data and calculations, in case, you need to return to them at a later stage. Finally, if previous year’s data is available, undertake trend analysis as this will need to be reported.
Step 5: Final verification & Submission
Finally, Step Five is to undertake a “sanity check” to ensure that your prepared submission meets all the applicable SECR requirements by verifying all calculations to ensure they are correct and accurate. As the Energy and Carbon Report will be including in your Accounts reported to Companies House, you should ensure that the Board, Director (or Partner) sign-off of the submission and to ensure that the Energy and Carbon Reporting is incorporated within the Accounts submission.
So, with the five-step approach, it will help navigate through your Streamlined Energy and Carbon Reporting.
If you need more information, the UK Government has published Environmental Reporting Guidance covering not only the Streamlined Energy and Carbon Reporting but, also, voluntary environmental reporting to support all organisations.
Do you want more direct guidance and support to help in developing, preparing, and submitting your Streamlined Energy and Carbon Reporting?
Our environmental and sustainability consultancy, onePlanet Solutions has been tracking its development and, already guided and supported four companies through the five step process.
If you need this direct guidance and assistance, please contact us for our SECR services, which are delivered with independence, integrity and confidentially.
I hope that this article has given you an insight into the Streamlined Energy and Carbon Reporting including our five-step process to the completion of your report.
Any questions on this article, please leave a comment below.
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