In April 2019, the UK Government officially closed the chapter on the previous Carbon Reduction Commitment (CRC) scheme, replacing it with the new mandatory Streamlined Energy & Carbon Reporting (SECR) legislation. Nearly one year later, the first compliance deadline is already looming. All qualifying organisations closing their year-end accounts this this month will be the first cohort required to comply with the new reporting legislation. To understand how affected organizations should prepare, we sat down with Tom Bardwell, Sustainability Consultant at Schneider Electric Energy & Sustainability Services.
Tom Bardwell, Sustainability Consultant at Schneider Electric Energy & Sustainability Services
Tom Bardwell has several years’ experience helping organizations meet energy and environmental regulations and targets, manage risks and, ultimately, future-proof their businesses; from both in-house and consultative perspectives.
SECR builds on the UK’s Clean Growth Strategy and is designed to help companies take stock of annual energy consumption and associated carbon emissions. This legislation should make it easier for them to identify and justify which actions they can take in the short-term to lower risk, maintain profitability and ensure an environmentally-efficient future.
Backed by guidance from the international Taskforce on Climate-Related Financial Disclosures (TCFD), the transparency about organizational performance resulting from SECR compliance brings assurance and clarity to increasingly vigilant investors and stakeholders. In short, this is another step to stamp out greenwashing.
So how do you go about ensuring your company is compliant with the SECR requirements?
Scope the Task Ahead
Knowing what data you need to gather is the first step towards compliance. All qualifying companies will need to disclose as an absolute minimum;
If your organization is a Quoted Company, you will also need to capture and report on global scope 1 and 2 greenhouse gas emissions (GHGs) in tonnes of carbon dioxide equivalent (CO2e). This covers all 7 gases under the Kyoto Protocol. Global energy consumption should also be disclosed, differentiating between energy consumed in the UK and overseas.
Hunt Down the Data
Data collection often requires contacting and coordinating with various departments and colleagues across the business. Identify who you need to contact early on to ensure that they are on board and have as much lead time to provide the information as possible. Internal delays in obtaining data can often pose one of the biggest risks for non-compliance; something which can carry a financial penalty or even imprisonment of directors in extreme cases.
If this is the first time your organization has actively collected and reported on scope 1 and 2 energy consumption data, identifying where to find the information can seem like a big task. Examples of types of data to search for include fuels, electricity, transport, intensity metrics and energy efficiency actions.
Where to look for the data will depend on who is responsible for which aspects of your business (UK or global). Some examples of data sources, include supplier invoices, meter readings, site managers and sustainability departments, among others.
Importantly, SECR is designed to simplify the reporting process by allowing organizations to omit data where it is either detrimental to the interests of the company, or simply not practical to obtain. If, when collating the data, either of these two circumstances become apparent, ensure that the reason for any data omission is clearly stated and justified in the report.
For organizations who complied with Phase 2 of the Energy Savings Opportunity Scheme (ESOS) at the end of 2019, most of this data should be readily available and current. Where possible, it is highly advisable to use this as a basis for SECR – especially since it will have been verified and signed off by a Lead ESOS Assessor.
Collect and Prepare the Data
Since there is no specific guidance on approaches to data verification or which standards to follow, it is important to ensure that the methodology applied is both consistent and robust. Poorly or inaccurately presented data picked up by external stakeholders could pose potential financial and reputational risks to your company.
Any methodology your organization applies should be based on relevant and recognized sources, such as the annually updated UK Government’s GHG conversion factors. When such a source is used, reference them. This not only reduces the risk of miscalculations but also provides greater assurance to external stakeholders.
Publish the Data
The information should be published in the company’s annual Directors’ Report, or an equivalent Energy and Carbon Report. Make sure the responsible person(s) are aware of this new, mandatory requirement as soon as possible to avoid any additional costs or delays to re-issue annual statements.
Timelines for publication of an annual report depend on the type of company. For companies with listed shares, annual reports are required within four months of the financial year’s end. For an EEA (European Economic Area) company preparing consolidated accounts, reports must be prepared in accordance with IFRS, as adopted by the EU.
Publication of SECR data is also a good opportunity to communicate the results to a wider audience, particularly where reducing the company’s environmental and social impact is integral to business strategy.
Consider other mediums, such as the annual business strategy or sustainability report. It may even be a good opportunity to raise some positive PR – liaise with the communications or media department to get help with creating an impactful and clearly presented press release or news article.
Following the above steps should set you on your way to SECR compliance. SECR presents a real opportunity for your organization to build a foundation for data collection and reporting, and then go further. By considering your Scope 3 impacts, for example, you will start to better understand and mitigate future risks facing your up-stream and down-stream operations. With ESG-focused equity funds reaching nearly $70bn in asset value in 2019, leading by example may not only be environmentally and socially beneficial, but also make sound business sense.
Schneider Electric helps its clients around the world with reporting services and software to ensure hassle-free compliance with these types of legislation. EcoStruxure™ Resource Advisor, our industry leading enterprise-level platform to manage energy and sustainability data, can help to transform reporting obligations, such as SECR or ESOS, into tangible business opportunities.
Find more on our SECR Toolbox, including a Special Market Update on SECR, and more articles, guidelines and podcasts around SECR collected to read or listen to at your leisure.