A Streamlined Energy and Carbon Reporting (SECR) Explainer - Last Updated: January 16, 2023

What is the UK's Streamlined Energy and Carbon Reporting (SECR) Policy?

The UK’s Streamlined Energy and Carbon Reporting (SECR) policy was introduced in 2019 and requires certain companies to report their energy use, carbon footprint, and greenhouse gas (GHG) emissions in their annual financial reporting. Companies listed on the London Stock Exchange have had to include climate-related disclosures on a “comply or explain” basis in their reporting since January 1, 2022 (or January 1, 2021, in the case of premium-listed companies).

SECR applies to all UK companies and organizations who are:

1. Quoted companies (companies listed on the London Stock Exchange, a European Economic Area market, the NYSE or NASDAQ)
2. Large unquoted companies
3. Large limited liability partnerships (LLPs)
4. Academy trusts (a group of schools)

In addition to listed or quoted companies, large companies and LLPs are required to comply and report under SECR if they meet two or more of the following criteria:

1. Turnover (or gross income) of £36 million or more
2. Balance sheet assets of £18 million or more
3. 250 employees or more

If a large company does not consume more than 40,000 kWh of energy in a reporting period, it qualifies as a low energy user and is exempt from reporting under SECR regulations. Any UK company that consumes over 40,000 kWh and meets the remaining criteria is required to report.

Moreover, in 2022, the UK Financial Conduct Authority (FCA) has also made annual Task Force on Climate-related Financial Disclosures (TCFD) reporting mandatory for over 1,300 of the country's largest UK-registered companies and financial institutions. This includes most of the UK’s largest publicly-traded companies, banks and insurers, as well as private companies with over 500 employees and £500 million in turnover. This means some large firms need to comply with both SECR and TCFD annual reporting, and UK sustainability reporting regulations are continuing to evolve, so we recommend keeping up to date with the latest from the FCA and BEIS.

UK regulators are using SECR and TCFD is to promote, standardize, and simplify sustainability reporting for companies. Many companies are currently under pressure to use a wide range of different sustainability reporting standards and frameworks. SECR and TCFD aim to consolidate transparency needs from UK regulators, investors, and other stakeholders.

SECR Reporting Principles

SECR guidance recommends the following principles should be applied when collecting and reporting on a company's environmental impacts and performance:

1. Relevant - Data collected and reported must appropriately reflect the environmental impacts of your firm and serve the decision-making needs of users and stakeholders
2. Quantitative - KPIs need to be measurable. Quantitative information should be accompanied by a narrative, explaining its purpose, impacts, and giving comparisons where appropriate
3. Accurate - Achieve sufficient accuracy in your sustainability and emissions reporting to enable users to make decisions with reasonable confidence as to the integrity of the reported information
4. Completeness - Quantify and report on all sources of environmental impact within the reporting boundary that you have defined. Disclose and justify any specific exclusions
5. Consistency - Use consistent methodologies to allow for meaningful comparisons of environmental impact data over time. Document any changes to the data, changes in your organisational boundary, methods, or any other relevant factors
6. Comparable - Use established industry standards and metrics for KPIs, don't invent your own
7. Transparency - Address all relevant issues in a factual and coherent manner, keeping a record of all assumptions, calculations, and methodologies used

How to Comply with SECR Requirements: Quoted Companies

SECR requires quoted companies to collect and report the following annual data:

1. Global scope 1 and 2 GHG emissions - Companies must inventory, calculate, and disclose their GHG emissions from direct operations. Scope 3 emission reporting is voluntary, but recommended.
2. At least one emissions intensity ratio - Intensity ratios are emissions factors that compare emissions data with an appropriate business metric or financial indicator, such as CO₂e per employee or million £ in turnover
3. Global energy usage - Energy consumption underlying the company's carbon calculations
4. Previous year emissions and energy data - The previous reporting year or period's figures for energy use and GHG, to compare changes year-over-year
5. Energy efficiency and emissions reduction projects - A narrative description of a company's main initiatives and projects during the reporting year to improve energy efficiency or reduce energy usage
6. Reporting methodology - SECR recommends companies use widely recognized independent sustainability reporting standards, such as: GHG Reporting Protocol, ISO 14064-1:2018, or GRI (Global Reporting Initiative) guidelines

Streamlined Energy and Carbon Reporting (SECR) Requirements for Other Reporting Organizations

Large unquoted companies, LLPs, and academy trusts have more limited compliance and reporting obligations under SECR. Non-quoted companies are required to disclose:

1. UK scope 1 and 2 GHG emissions - Companies must inventory, calculate, and disclose their domestic, country-specific GHG emissions from direct operations. Scope 3 emission reporting is voluntary.
2. At least one emissions intensity ratio
3. UK energy usage - Domestic energy use and consumption underlying the entity's carbon calculations
4. Previous year emissions and energy data - The previous reporting year or period's figures for energy use and GHG, to compare changes year-over-year
5. Energy efficiency and emissions reduction projects - Narrative description
6. Reporting methodology - SECR recommends companies use widely recognized independent sustainability reporting standards, such as: GHG Reporting Protocol, ISO 14064-1:2018, or GRI (Global Reporting Initiative) guidelines

This means more companies need to prepare to plan and implement their SECR compliance approach by 2023 in order to be ready for the next reporting cycle and stay compliant.

SECR's "Comply or Explain" Provision

SECR also contains a helpful “comply or explain” provision. This clause permits companies to omit data if it's not possible to collect it, provided the reporting organization explains what has been excluded and why. Deliberately omitting information in SECR reporting is strongly discouraged, but gives organizations that are earlier in their ESG reporting journey time to collect and prepare their information for a future year's report.

A Few Helpful Recommendations

Your Next Steps With SECR Sustainability Reporting

For organizations in the early stages of their sustainability reporting journey, we have a few general recommendations, additional reading, and suggested next steps:

Materiality assessment - Before collecting data or thinking about preparing your first report, it’s often beneficial to conduct a “Materiality Assessment” to help determine what your sustainability goals, targets, KPIs, and reporting objectives should be. A materiality assessment is a project which determines and ranks the most material themes for your business based on market data, stakeholder interviews, and surveys. For example, a healthcare company might focus on healthcare access, affordability, innovation, and its supply chain. A technology company could focus on data privacy, security, and STEM education access. A bank might designate financial inclusion as its most material theme. Pick and rank the right sustainability themes depending on your organization’s mission, makeup, goals, and ESG maturity.

Sustainability data systems and process - While this might go without saying, in order to report your organization's sustainability performance, you need to know what it is - with a high degree of accuracy. Your materiality process can help guide you toward the main sustainability themes you may need to focus on and collect data around. Is employee travel a big source of your organization's carbon footprint? Facilities? Manufacturing sites? Where does that data exist today, and how will you access or collect it? Many organizations start their sustainability reporting with relatively simple spreadsheets, surveys, and documents, but things can get complex fast - particularly for larger companies. If you're an organization with a medium-to-large or complex environmental footprint, you likely need dedicated sustainability reporting and data management software, like the kind we design here at Brightest to help organizations stay SECR compliant. Ongoing report archiving, version control, audit readiness, and governance are also important to think about, since you'll be reporting every year.

Further reading - Our free guides to UK sustainability reporting, sustainability measurement and sustainability reporting provide additional, detailed guidance and insights on how to measure and report your sustainability performance for SECR and other stakeholders.