Written by Paul Bosworth, Senior Consultant at Ramboll
At the beginning of April this year, the new UK Companies and Limited Liability Partnerships Regulations came into play. These regulations include new requirements for Streamlined Energy and Carbon Reporting (SECR), meaning that all large unquoted companies or Limited Liability Partnerships (LLPs) with financial years starting on or after 1 April 2019, will need to disclose their yearly UK energy use, the associated greenhouse gas emissions, and any energy efficiency action taken in their annual reports.
The new requirements for SECR will apply to UK organisations defined as ‘large’, and for those businesses with activities mainly taking place offshore, energy use and emissions for both the UK and offshore area must be disclosed. It is therefore vital for companies to ensure that the relevant disclosures are reported, as those who do not could face enquiries from the Financial Reporting Council’s Conduct Committee.
Reporting an organisation’s greenhouse gas emissions and energy efficiency can be complicated, especially for those who have not previously been required to report such data. Therefore, getting reporting right the first time will also help to smooth the process for future annual reports. To help achieve this, there are three key areas all businesses should focus on to make sure this new obligation is as painless as possible.
Establish the existing reporting structure
A crucial first step is for business leaders to ensure they liaise with their Finance Directors to determine the organisation’s existing reporting, clarify details of accounts with energy suppliers, and establish the recording of any payments for transport fuel. It’s also helpful to ensure that they allow sufficient space in the annual report to include energy and carbon disclosure reporting.
Following this, it’s important to identify sections of the organisation that will need to be included in SECR to establish reporting boundaries for the business, and agree an approach for energy and emissions reporting that can be consistently applied each year. Once this has been ascertained, business leaders should carefully record the organisation’s activities that release greenhouse gas emissions (known as the ‘operational boundary’), such as natural gas combustion in boilers or diesel fuel use.
Managing the data
Data for the most common types of emission releasing activities is typically collected in the form of invoices, meter readings and delivery notes. It’s incredibly important for businesses to keep an up to date register of contact details for data providers– this will ensure that data is collected efficiently and without risk of error if the responsibility of reporting emissions is passed on to a different member of the team. It can also help if businesses make use of their standard accounting and environmental management systems, to ensure that energy reporting data is collected in the same standard as any other data.
Of course, many organisations may choose to produce their first SECR report on spreadsheets. However, the high volumes of data and complex formulae can cause problems later on down the line, with errors more likely to occur and the whole process becoming increasingly time-consuming. Because of this, it may be helpful to consider using an online structured database system, which is typically capable of automatically inputting data from the source and storing it more efficiently. It also often includes quality management and advanced analysis tools. Using such systems can allow for more effective monitoring and targeting, which in turn can make the identification of emissions reduction opportunities considerably easier to manage.
Putting the report together
Once the data has been collected and sorted, it will need to be converted into emissions in tonnes of carbon dioxide equivalent (tCO2e), using the UK Government GHG Conversion Factors for Company Reporting. Keeping note of the justification of the business’ selection of emission factor and including the source reference will help to avoid any confusion when compiling the SECR report the following year.
Finally, it’s important to calculate an intensity ratio, which will compare the emissions data with an appropriate business metric or financial indicator. For example, this could be sales revenue, or perhaps square metres of floor space.
Increasing attention towards the impact of business on our planet means it is extremely valuable for organisations to understand their contribution to climate change through the reporting of energy use and emissions. Aside from the possible regulatory consequences of non-compliance, SECR also offers a number of benefits to businesses. Reporting energy and emissions performance can provide organisations with the confidence to invest in energy efficiency measures and opportunities that allow them to reduce their emissions. It can also improve a business’ external perceptions among its investors and other stakeholders, including their climate change risk exposure. Whilst it may seem a daunting process to embark upon, by carefully getting your energy reporting procedure in order, you can and will benefit from SECR.