Streamlined energy and carbon reporting to be mandatory

Large companies will be required to adopt a streamlined energy and carbon reporting (SECR) framework from April 2019 which will see them include details of energy use, carbon emissions and their energy efficiency measures in their annual report, as part of the government’s drive for business and industry to cut energy use by at least 20% by 2030

The government has decided on mandatory SECR reporting following a Department for Business, Energy and Industrial Strategy (BEIS) consultation which closed at the beginning of this year and attracted 155 responses.

This found that 75% of respondents favoured this approach, which will build on the existing mandatory reporting of greenhouse gas emissions by UK quoted companies and the energy savings opportunity scheme (ESOS).

In its response to the consultation’s findings, BEIS stated: ‘Whilst we acknowledge some of the concerns raised about using this route, we are keen to benefit from the simplification and administrative burden reduction of aligning with existing mandatory greenhouse gas reporting. This is also the main reason for using director’s reports, due to the current obligation on quoted companies and as it was also the preferred place in annual reports of the majority of those who expressed a preference.

‘Additionally, use of annual reports is in line with the Financial Stability Board’s taskforce on climate-related financial disclosures which recommends including climate-related disclosures as part of mainstream financial filings.’

The new SECR reporting framework will apply to all quoted companies and to large UK incorporated unquoted companies which meet two or more criteria within a financial year. These are having at least 250 employees or annual turnover greater than £36m and annual balance sheet total greater than £18m.

BEIS says this would mean extending the number of companies that report the SECR information in annual reports from around 1,200 to 11,900.  Large businesses (and other large undertakings) are already measuring their energy use under ESOS albeit there is no requirement for public disclosure. UK subsidiaries, that qualify for SECR in their own right, will not be required to report where they are covered by a parent’s group report (although they may report individually on a voluntary basis).

Companies that are not registered in the UK (non UK incorporated) are not obliged to file annual reports at Companies House, and will, therefore, fall outside the scope of the mandatory SECR framework. Where a parent company is not registered in the UK but has subsidiaries that are registered in the UK, these subsidiaries, if qualifying for SECR in their own right, would need to report.

The government is also proposing that large LLPs be obligated to include SECR information in their annual reports, through an equivalent to a directors’ report. This is expected to include an estimated 230 large LLPs who BEIS considers would currently be obligated to carry out energy audits under ESOS and may also be obligated to report under the carbon reduction commitment (CRC)energy efficiency scheme.

Streamlined energy & carbon reporting Government Response is here.

Report by Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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