Overview of the Streamlined Energy and Carbon Reporting Framework:
For financial periods commencing on or after 1 April 2019, large unquoted companies and LLPs are required to adopt a streamlined energy and carbon reporting (“SECR”) framework. This requirement has been implemented by the Department for Business, Energy and Industrial Strategy (“BEIS”) with an aim of increasing awareness of energy costs and energy efficiency measures, in order to help reduce carbon emissions. The legislation also amends the existing requirements for quoted companies that are already obliged to report on Greenhouse Gas (GHG) emissions, however the below article covers the requirements for unquoted companies only.
Who is this applicable for?
- Quoted companies of any size that are already obliged to report under mandatory greenhouse gas reporting regulations.
- Unquoted Companies, LLPs and groups qualifying as large as defined under the Companies Act 2006, i.e. those that meet at least two of the following criteria:
- Turnover of more than £36m;
- Balance sheet total of more than £18m;
- More than 250 employees
What are the reporting requirements for large unquoted companies?
Large unquoted companies and LLP’s are required to report on the following:
- UK energy use (as a minimum gas, electricity and transport, including UK offshore area);
- Associated greenhouse gas emissions;
- Previous year’s figures for energy use and greenhouse gas emissions; (these can be excluded for first year disclosure);
- At least one intensity ratio (a ratio which expresses the business’ annual emissions in relation to a quantifiable factor e.g. tonnes of CO2e per total square metres for the property sector);
- Energy efficiency action taken; and
- Methodology used.
The above information should be disclosed in the Directors’ Report or equivalent for LLPs.
When is a company subject to exemption from the reporting requirements?
- Companies which are low energy users (40,000 kWh of energy or less over the period for which the report is prepared). These companies will still need to include a statement in their report confirming that they are a low energy user.
- In situations where reporting on energy usage is considered by the directors to be seriously prejudicial to a company’s interests (companies are encouraged to rely on this only in exceptional circumstances and the report must state that the information is not disclosed for this reason.)
For companies reporting at group level the disclosures must consider both the company and its subsidiaries included in the consolidation. Subsidiaries which would not be obliged to report individually according to the thresholds, can be excluded from the report.
A subsidiary is not required to report their energy and carbon information in their individual accounts if it is included within the group reporting of a parent company which has provided the relevant reporting as part of the group accounts.
What additional guidance is available?
BEIS has published guidance to assist companies in complying with the SECR framework. This guidance is very helpful, and it is important to read through it before preparing the required disclosure. It is chapter 2 which is relevant for the SECR framework, and in particular the following pages are useful:
- Pages 39-49 of the guidance discuss each reporting requirement above in further detail, including how to collect energy use data and the suggested methodology for calculating greenhouse gas emissions.
- Pages 54-57 of the guidance includes a template SECR report and example accompanying narrative for unquoted large companies and large LLPs.
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