SECR: From Opportunities to Managing Risk

February 5, 2020 | Insights

For too many UK companies phase two of the Energy Savings Opportunity Scheme (ESOS) was perceived as a business burden – a distraction from business as usual and a necessary evil that returns in a four-year cycleHowever, for the enlightened, it came as a great business opportunity – a chance to identify pragmatic cost-saving measures that could deliver for the triple bottom lineAfter all, the core objective of the regulation is to draw the attention of senior decision-makers to sensible investments with a strong return on investment. 

So, as we look to 2020, can the new UK Streamlined Energy and Carbon Reporting (SECR) help drive the change needed in the decisive decade? Here we look at the benefits that carbon reporting can deliver to your business and how the exertions from ESOS can ease the new challenges under SECR.

The Decisive Decade

With the UK government signed up to a target of Net Zero by 2050, to limit global warming to 1.5 °C, and the EU expected to follow, the next 10 years are seen as the decisive decade to mitigate the effects of climate change. Meaning that for organisations, the pressure to evidence and reduce their energy emissions is only set to rise. 

As well as mandatory carbon reporting, movement in the investment markets driven by the new Task Force on Climate-related Financial Disclosures (TCFD) is requiring that companies go even further through voluntary reporting. The initiative from the Financial Stability Board (FSB) will see climate-related risk reported within company reports, meaning greater transparency for investors, lenders, insurers and other stakeholders. Although currently voluntary for most organisations, the attitudes of investors and regulators on climate change are coalescing – the change is coming, and business will need to get on board or be left adrift. 

Additionally, growth in climate activism, with significant action from the Youth Strike for Climate and the Extinction Rebellion movement, is heightening public awareness of the reality and impacts of climate change.

This rise in awareness creates a demand from consumers for the right information when making purchasing decisions. With environmental standards becoming commonplace in business procurement processes, and packaging which displays the carbon footprint of products beginning to appear on shelves, organisations are increasingly expected to lower impact and demonstrate green credentials to remain competitive.

With action on climate change moving only in one direction, SECR can be welcomed as a positive change for greater accountability and transparency. If we consider ESOS to be an opportunity to deliver the change needed, then SECR surely is the start of a journey to managing climate risk – demonstrating a positive step forward for investors, consumers and key stakeholders. 

So, How Do ESOS and SECR Compare?

ESOS and SECR are the latest mandatory energy reporting schemes affecting large organisations in the UK. Due to similarities in the qualification criteria, most companies who have recently completed ESOS will be required to comply with SECR. 

The Energy Savings Opportunity Scheme (ESOS) 

ESOS is the UK’s interpretation of the EU Energy Efficiency Directive (EED), requiring large organisations to undertake energy efficiency audits every four yearsThe scheme incorporates all organisational energy consumption from buildings, industrial processes and transport, and requires organisations to identify energy-saving measures and the cost of implementing them.  

Streamlined Energy and Carbon Reporting (SECR) 

SECR came into effect in April 2019, with the first reporting period falling in 2020. SECR replaces the Carbon Reduction Commitment (CRC) scheme, simplifying reporting requirements and drawing in an additional 8,000 businesses into mandatory carbon reporting. Eligible organisations are required to report on their energy consumption and greenhouse gas emissions every year as part of the Directors’ report. SECR aims to increase the transparency and drive implementation of the recommendations from ESOS.

Comparing the Regulations 

ESOS

SECR

Eligibility criteria

UK companies with over 250 employees or a turnover of over £38.9 million and a balance sheet of over £33.5 million.

 

UK Quoted companies and UK registered companies (unquoted and LLP’s) who meet 2 of the following criteria:

  • over 250 employees
  • a turnover of over £36 million
  • a balance sheet of over £18 million

Exemptions to the criteria

Public bodies as defined by BEIS.

 

  • Very low energy users – (40,000kWh or less during the 12-month reporting period).
  • Unquoted companies can apply for an exemption where it is not practical to obtain some or all of the SECR information.
  • Where company directors believe that disclosing SECR information will be seriously prejudicial to the interests of the company.

The number of organisations required to comply

Approximately 10,000 organisations. Approximately 11,900 organisations.

Reporting requirements

Total organisational energy consumption from buildings, transport and industrial processes.
  • Energy use and greenhouse gas (GHG) emissions for their financial year reporting period.
  • The energy efficiency actions taken.
  • The methodology used to calculate the required information.
  • At least one intensity ratio.

Report outcomes

A report(s) containing opportunities for energy savings across the organisation. Disclosure in a company report. E.g. the Directors’ report.

How Can ESOS Prepare Organisations for SECR?

Those who have just complied with ESOS have a significant advantage when preparing for SECR, as the data collection systems can be actively reused for collecting the energy consumption data required for SECR.  In addition, organisations have the opportunity to showcase energy efficiency actions implemented, or planned, as a result of ESOS.

Why Anthesis?

Our experienced team have a long history of supporting clients with energy compliance, including both phases of ESOS as well as Mandatory Greenhouse Gas Reporting.

Our compliance model allows organisations to understand what their data is telling them so that the information is both meaningful, and motivational to staff, customers, and other stakeholders. We support clients to manage their energy and emissions, preparing them for future compliance, protecting them against climate-related risk, and supporting commercial growth.

To find out more about your compliance with SECR, or the wider energy and carbon policy landscape and how it affects your business, get in touch with Ben Lynch using the form below.

Ben Lynch
Director, UK

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