Common pitfalls and tips for SECR compliance reporting

Streamlined energy and carbon reporting (SECR) is the first bit of greenhouse gas (GHG) emissions compliance that companies in the UK face. 

SECR compliance becomes relevant when your company becomes quoted, or grows to be a large company/LLP, defined as meeting two of the following three criteria: 250 employees, £36 million turnover, and an £18 million balance sheet. At this point you need to include SECR content in your Annual Report published at Companies House.

The contents itself is seemingly fairly straightforward, explained in just a few bullet points buried in the government’s Environmental Reporting Guidelines, on pages 30-31. Although there are differences for quoted and unquoted/LLP companies, these boil down to the scope of reporting, with quoted companies required to report for their global operations and unquoted/LLP companies only required to report for the UK.

But while the SECR reporting requirements are fairly straightforward, we often see information missed or errors in the reporting. Here are our hints and tips to make sure your SECR reporting is fully compliant.

Get your travel boundaries right 

Most companies correctly report their purchased electricity and gas/fuel use but the transport portion can be confusing. All companies in scope for SECR should report their scope 1 and 2 related transport (i.e. travel in company-owned or leased vehicles). In addition, unquoted companies in scope should also report business travel in employee-owned vehicles or hire cars.

Include both your location and market based greenhouse gas emissions

These are your scope 1 and 2 emissions. Assuming these have been calculated correctly, this is fairly straightforward. The opportunity we often see missed though, is to include both location-based and market-based emissions. Location-based figures are recommended in the guidance and are what you need to report if you want to validly say that your SECR reporting aligns with the GHG Protocol (which you’ll likely be saying in your method – see point 5 below). Market-based figures however are the ones that you're likely going to want to track your performance against (because they’re easier to reduce - through renewable electricity tariffs).

Don’t forget your intensity ratio

Straightforward but we've still seen this missed. The most commonly used ratio is simply your carbon emissions divided by your turnover. For the reasons explained above, we'd recommend using the market-based figures for this.

Years of disclosure should be focused

For compliance you only need to disclose data for the current and previous reporting years. Whilst up to five years’ worth of data is encouraged, it is not often seen, but what we do sometimes see is cherry picking of reporting years, most often with the company’s target baseline year being included in addition to the current and previous reporting year emissions. Whilst it's fine to do this, it isn't strictly needed for compliance.  

We generally recommend keeping your SECR report focused on compliance and separately reporting your full (scope 1, 2 and 3) GHG inventory, with associated targets, and performance. If you do choose to include older emission inventories, make sure that the same calculation method was used for all years presented.

Leverage your business-as-usual energy efficiency actions

This needs to be actioned in the financial year. The opportunity we see missed here is that often companies forget to report their BAU actions. Just because you installed LED lighting a few years ago doesn't mean you can't still include it in your SECR report as ‘use of LED lighting’.

Align your GHG methodology with the GHG Protocol

This is usually the biggest opportunity for improvement. We see SECR reports explaining the practical process of data collection within the business when actually what should be included is:

• The GHG accounting method (usually the GHG Protocol Corporate Standard).

• The scope and boundaries of the reporting (e.g. use of the operational control approach).

• The greenhouse gases included in your calculations, specifically whether all seven of the Kyoto Protocol greenhouse gases have been included - carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF₆) and nitrogen trifluoride (NF₃)). If you're not sure, the likely answer is that they have been. You'll know this if you've a) included all your emission sources, and b) used the UK government database for all emission factors and wherever available, applied the combined CO₂e figure.

• The source of your emission factors. Typically this is the UK government database but for completeness you should also specify which publication year you have used for each reported year.

Follow this advice and you should end up with a fully SECR compliant and succinct 1-2 page report.

You can, of course, embellish the report with more information. We generally don't advise this except in the case of GHG targets - If you have public GHG targets, particularly Net Zero ones and/or those aligned to Science Based Targets, it's useful information for your investors to be aware of and is worth including in the report.

For support producing your company’s SECR report, including calculating the underlying energy and GHG emission figures, contact us.

Authored by Caroline Johnstone.