As temperatures increase and sea levels rise, companies are taking action to reduce their carbon emissions and contribute to the fight against climate change. In 2019, the UK government made it mandatory for large businesses to annually report on their energy and carbon emissions throughout the year. However, often, companies can make detrimental mistakes when preparing and submitting their Streamlined Energy and Carbon Reporting (SECR) reports, which can lead to penalties and non-compliance.
In this blog, we’ll explore:
- What SECR means and who it applies to.
- What the most common mistakes made with SECR are.
- Solutions to these mistakes.
What Does SECR Mean?
SECR stands for Streamlined Energy and Carbon Reporting, and was implemented in 2019 by the UK Government. It aims to make carbon reporting more streamlined and accessible for businesses. It also aims to enhance corporate transparency and get businesses to take accountability for their carbon emissions. Businesses must report on their scope 1 and 2 emissions and energy consumption.
Who Qualifies?
In accordance with the Companies Act 2006, if your company is classed as “large”, you will need to comply with SECR and include a report in your annual accounts. If your organisation meets two out of the following criteria, you will be required to report on SECR:
- Your organisation has over 250 members of staff.
- Your organisation has a turnover of over £36 million.
- Your organisation has an annual balance sheet total in excess of £18 million.
Common Mistakes Made With SECR
Often, companies can overlook important steps within the SECR process, which can unfortunately lead to non-compliance and penalties. Mistakes made can stem from a lack of understanding of the SECR methodology, gaps in the data, and errors in the calculation process. Specifically, more mistakes include:
1) Incomplete Data
One of the most common mistakes in SECR reporting is working with incomplete data. Often, companies calculate their carbon emissions while using inaccurate, incomplete data. Government legislation encourages companies to have just 2-3% maximum of energy bills to be missing from your data set. These gaps can occur due to a lack of resources for gathering the data (especially with bigger sites), and leaving this process until too late.
To limit this issue, put a system in place that does not solely rely on you. Implementing a precise management structure into your reporting process can assist you when gathering the correct data. Alternatively, speaking to someone in accounting or regional heads to help you package up the data can save you valuable time.
2) SECR Importance and ‘Buy In’
In today’s climate, global warming is becoming increasingly vital to mitigate and so it is important that your company complies with SECR. It is important that you convey the importance of SECR to your colleagues. We recommend that you put a structure in place so that it is not merely one person who is chasing the data. You can get your senior managers to reiterate the importance of the SECR data, to reinforce this compliance to your colleagues. Alternatively, implementing a carbon reporting software system is a productive method which can hugely speed up the data process.
3) Scope
Effectively cover all of your scopes and follow a structured approach to ensure compliance with SECR regulations. It is important to make sure that you cover all of your site’s emissions. However, there are some exceptions. For example, if you are leasing a building and do not have control over the site’s energy, you can exclude the building from the scope of your operations. If you are in control of the energy, then you should use this lease in your report. For vehicles such as leased cars, you should make sure to account for them.
4) Errors In The Calculations
Another mistake which can occur are errors in the calculation and inaccurate traceability of the calculation chain used to calculate the figures required. It is always a good idea to incorporate an audit trail for the numbers in order to defend how a number is calculated. If you are unable to defend your numbers, it is almost impossible to audit your report. If you are not using a carbon accounting software (which would be recommended here), make sure to detail every step, use the right figures and take notes.
5) Selection of the carbon intensity ratio
What is carbon intensity ratio? ➡️ A metric which expresses the greenhouse gas emissions relative to a specific business activity. The ratio allows for a meaningful comparison of emissions performance over a certain period of time and across a range of different organisations. Examples: CO2e per sales revenue, or tonnes of CO2e per total square metres of floor space.
You’ll want to know your carbon intensity ratio in order to find out your energy usage. We recommend that you select a metric such as Kg/Co2 per square foot or pound turnover. This metric is more understandable and easier to annually reproduce.
Other Common Mistakes:
Combining Scope 1 and 2 emissions: Often, companies only provide one total figure for emissions in both scopes. However, SECR requires you to provide separate figures for each scope as well as giving a total figure for the overall emissions in all scopes.
A lack of methodology: When completing your SECR, fully explain your methodology for analysing energy and climate data. Set out clear, precise and ambitious targets, and include all of your metrics.
In Summary
Overall, it is important for businesses to comply with SECR regulations. The above steps can help you avoid some of the most common pitfalls when producing your SECR. If you are interested in finding out more about SECR, don’t hesitate to contact us.