If you are UK registered, unquoted, and meet the definition of a large company under the Companies Act 2006, then the directors are now required to report on the Streamlined Energy and Carbon Reporting Framework (“SECR”).
What constitutes as a large company?
A large company will breach 2 of the below thresholds:
- Turnover over £36m
- Gross Assets over £18m
- 250 employees or more
What is required to be disclosed?
Companies that fall under this heading and have consumed more than 40,000 kilowatt hours (kWh) of energy are required to disclose a SECR. This forms part of the Director’s Report included with the statutory financial statements, and therefore will be filed with Companies House.
The annual UK usage (in kWh) along with the associated greenhouse gas emissions (in tonnes) of Carbon Dioxide equivalent (CO2e) must be stated for the reporting period. The company must consider their energy usage from all angles, including gas, electricity, and fuel from vehicles that the company is responsible for.
This data is then used to disclose an intensity ratio. This is a way to compare emissions to an appropriate business metric such as tonnes of CO2e per sales revenue, tonnes of CO2e per man hours, or tonnes of CO2e per total square metres of floor space. Over time, this will allow organisations to draw comparisons with companies in similar industries.
There are no set methodologies provided, and directors will need to consider carefully the methodologies they adopt, as these will be the basis of comparison for future years and any trend in (hopefully) reduction of energy and emissions. The methodology must be disclosed.
Finally, the company must include a narrative of measures taken to improve energy efficiency going forward.
Low energy usage exemption
Companies using less than 40,000 kWh are considered exempt and a statement should be included to this effect in the Director’s Report.
The parent’s size is determined by the group it is heading. If the group is large, then the parent is large and must prepare its own SECR report unless the parent is a low energy user (under 40,000 kWh) - this will typically be a holding company. The group accounts will then include the data for the large subsidiaries SECR as well as the parent company. If the parent is a low energy user, then there must be disclosure to state that the parent has taken the low energy user exemption.
Benefits of the disclosure:
- Demonstrates your businesses commitment to Corporate Social Responsibility and is in line with the UK government’s initiative to have the UK carbon neutral by 2050
- Transparency in reporting wider environmental KPIs to stakeholders including suppliers
- Provides an awareness of energy costs and usage allowing considerations for implementing energy efficiency measures to reduce the company’s costs and impact on the environment.
When do I need to consider this?
Reporting is required for periods beginning on or after 1 April 2019. For further assistance in meeting these requirements, or if you have any questions, please contact Christina Torrance or your usual Anderson Anderson & Brown contact.