The latest Environmental Reporting Guidelines from the Department of Business Energy and Industrial Strategy (BEIS) were published on 31 January 2019. They include Government guidance on the new Streamlined Energy and Carbon Reporting framework (SECR) which comes into force from 1 April 2019¹ and replaces CRC. The updated guidance addresses SECR in Chapter 2, but it does not amend other areas covered in the Environmental Reporting Guidance. The rest of the document sets out best practice and opportunities to go beyond what is legally required. This guidance is aimed at organisations seeking to optimise their environmental reporting.
Environmental disclosures are increasingly requested by investors, shareholders, customers and other stakeholders in annual reports and accounts.
The government recognises that it is no longer necessary to mandate reporting of energy and carbon reporting in the same prescriptive way as in 2010 when the CRC scheme was introduced². The majority of organisations now have a much better understanding of their energy consumption. In addition, environmental disclosures are increasingly requested by investors, shareholders, customers and other stakeholders in annual reports and accounts. To minimise the reporting burden on companies, the government has sought to simplify its requirements and find synergies between mandatory reporting and voluntary reporting initiatives, such as the Taskforce on Climate-related Disclosures (TCFDs). BEIS engaged with key stakeholders (including Carbon Intelligence) to ensure that participants find the SECR guidance relevant and user-friendly, whether they are quoted companies or large unquoted companies and LLPs.
What has been amended in the SECR guidance from the stakeholder engagement?
SECR guidance can be found in Chapter 2 of the Environmental Reporting Guidance. Please see our previous blogs for a summary of the main SECR qualification and reporting requirements. Following the feedback received from key stakeholders, the SECR guidance has been amended in the key areas:
Encouragement of greater voluntary disclosures: BEIS has set out more the ways in which businesses could go beyond the SECR requirements to demonstrate best practice, including the requirements dealing with the energy efficiency action narrative, intensity ratios, previous year’s data and increasing the range of recommended voluntary disclosures in the reporting templates. Reference to the Taskforce on Climate-related Disclosures (TCFDs): The guidance recommends and encourages disclosure aligned with the TCFD principles. Guidance on the “de minimis” provision for emissions and energy use reporting: BEIS has extended the section that deals with ‘materiality’, which now applies to both quoted companies and unquoted businesses and includes some best practice guidance.
Greater clarification of different landlord/tenant scenarios: The guidance clarifies how energy use should be disclosed or estimated, including where tenants may not be responsible for its purchase. Greater encouragement of the use of dual reporting of emissions: This includes location (grid-average) emission factors for purchased electricity, following the approach taken in Government’s existing guidance and the revised ISO 14064. This is now reflected in section 9 and revised reporting templates. Clarification on non-disclosure on ‘seriously prejudicial’ and ‘not practical to obtain’ grounds– the guidance clarifies that the ‘seriously prejudicial’ option should only be applied in very exceptional circumstances. Expanded sections on materiality will help businesses in application of exclusions on ‘not practical to obtain’ grounds.
Group reporting, eligibility of companies and LLPs in public sector bodies: Additional information and clarification is included on the types of organisations in scope for SECR reporting. Assurance/verification: There is no requirement in the legislation for independent verification of assurance. However voluntary, independent assurance on the accuracy, completeness and consistency of energy use, GHG emissions data and energy efficiency action is recommended as beneficial to both internal decision-making and for external stakeholders.
What can companies and LLPs do now to prepare for SECR reporting?
The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 come into force on 1 April 2019. Qualifying organisations will need to include the required information in the company accounts for financial years commencing on or after this date. BEIS estimates that around 11,900 companies³ will be obliged to report under SECR. Many of these organisations already collect energy data for CRC and ESOS compliance or for voluntary reporting frameworks, but some will be reporting for the first time. Organisations should undertake the following actions to prepare for their first reporting year:
- Understand the corporate organisational structure
- Understand if you meet the qualification criteria.
- Review the current approach to energy and emissions reporting (Do you have appropriate data and systems in place)?
- Plan, undertake and record energy efficiency actions to be included in the Directors’ Report
- Decide on appropriate intensity ratio(s)
If you want to learn more about SECR and what it could mean for your business then get in touch and allow our team to leverage their expertise to guide you through the process.
¹ The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018
²The price signal provided by CRC allowances will be replaced by increases in the Climate Change Levy (CCL) in April 2019
³ Streamlined Energy &Carbon Reporting Government Response to the Consultation July 2018