SECR Reporting for SMEs

Reporting carbon emissions can seem daunting for small and medium enterprises (SMEs).

But with the right guidance on the Streamlined Energy and Carbon Reporting (SECR) framework, SMEs can comply in a strategic way that catalyzes sustainable growth.

In this post, we'll walk through an overview of SECR tailored to SMEs, from understanding the reporting requirements to using digital tools to enhance compliance. You'll get a step-by-step guide to crafting an SECR report along with advanced strategies to align sustainability and business objectives.

The Essentials of SECR Reporting for SMEs

Streamlined Energy and Carbon Reporting (SECR) is a UK government framework that requires companies to report annually on their energy use and carbon emissions. It applies to large companies and 'small and medium-sized enterprises' (SMEs) that meet certain criteria.

SECR aims to encourage companies to increase energy efficiency, reduce emissions, and lower energy costs. For SMEs specifically, it promotes sustainability practices and helps prepare for future environmental regulations.

Understanding SECR Reporting Requirements

SMEs must report under SECR if they:

Have over 250 employees or annual turnover over £36 million
Consume more than 40,000 kWh of energy within a 12 month period

Reporting includes disclosing:

UK energy use (electricity, gas etc)
Associated greenhouse gas emissions
An emissions intensity ratio

Data must derive from verifiable sources and calculations should follow SECR guidance methodology.

SECR Guidance for SME Compliance

To comply with SECR, SMEs should:

Appoint a SECR lead: An individual or team responsible for collating data, submitting reports etc.
Measure energy use: Record electricity, gas, transport fuel over the reporting year.
Calculate emissions: Following appropriate carbon conversion factors from government guidance.
Draft an emissions report: Highlighting energy use, emissions, targets and strategies.
Integrate SECR into business practices: To drive efficiencies over the long term.

Key deadlines include submitting annual reports in line with financial filings.

The Importance of SECR for Sustainability

SECR aligns with the UK’s legally binding target to reduce emissions 78% by 2035 compared to 1990 levels. By requiring measurement and reporting, SECR helps SMEs quantify and address their climate impacts.

Over time, SECR reporting will likely expand in scope to capture wider sustainability metrics. Getting started now positions SMEs well for future regulations. Proactive companies can also use SECR insights to engage stakeholders and demonstrate commitment to emissions reductions.

SECR Reporting Framework: A Primer

The SECR reporting framework includes:

Measuring energy use and emissions sources
Calculating emissions using approved carbon conversion factors
Disclosing energy and emissions data annually alongside financial filings
Reporting via narrative summaries highlighting strategies pursued

While streamlined, SECR builds foundations for more advanced sustainability measurement and disclosure down the track. It plugs SMEs into broader decarbonization efforts across the UK private sector.

What is SECR?

The Streamlined Energy and Carbon Reporting (SECR) regulation requires large UK companies to report annually on their energy use and carbon emissions.

Introduced in 2019, SECR aims to increase business transparency and accountability around sustainability. It applies to UK quoted companies, large unquoted companies, and large limited liability partnerships (LLPs).

Specifically, businesses must disclose:

UK energy use (kWh)
Associated greenhouse gas emissions (tCO2e)
An emissions intensity ratio (tCO2e/£million turnover)
Information about energy efficiency measures

Companies can compile this sustainability data using an SECR reporting calculator. They must include the disclosure within their annual Directors' Report.

The SECR framework aligns with the UK’s Climate Change Agreements and Streamlined Carbon and Energy Reporting scheme (SECR). It forms part of the country's plan to cut emissions by 68% by 2030.

In summary, SECR regulations require large UK firms to measure, report and take responsibility for their environmental impacts. This drives climate action among businesses.

What did SECR replace?

The introduction of Streamlined Energy and Carbon Reporting (SECR) in 2019 coincided with the end of the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme.

The SECR regulations significantly expanded the number of UK companies required to disclose energy usage and carbon emissions data. While the CRC applied to around 2,000 organizations, SECR captures over 11,900 companies incorporated in the UK.

This dramatic increase stems from the lower qualification thresholds under SECR. Organizations are required to participate if they meet at least two of the following criteria:

Annual turnover exceeding £36 million
Balance sheet total over £18 million
Over 250 employees

By contrast, the CRC had a single qualification threshold of consuming over 6,000 MWh per year of half-hourly metered electricity.

The expansion under SECR aims to incentivize energy efficiency investments and emissions reductions across a much broader range of large companies. It also supports the UK's overall carbon neutrality targets.

What are ESOS and SECR?

The Energy Savings Opportunity Scheme (ESOS) and Streamlined Energy and Carbon Reporting (SECR) are two UK regulations related to energy usage and greenhouse gas emissions reporting for large companies.

Key Differences

The main differences between ESOS and SECR are:

Purpose: ESOS is an energy audit focusing on identifying cost-effective energy savings opportunities. SECR requires annual reporting of energy use and carbon emissions.
Scope: ESOS applies to large undertakings that meet the qualification criteria. SECR applies to quoted companies, large unquoted companies and LLPs.
Metrics: ESOS reports on energy consumption only. SECR requires reporting of both energy use and greenhouse gas emissions.
Frequency: ESOS assessments must be conducted every 4 years. SECR reporting is annual.

So in summary:

ESOS is an energy audit looking for savings opportunities.
SECR is an annual emissions reporting requirement.

While related, they have different aims - ESOS helps companies identify energy savings while SECR drives carbon transparency through public emissions disclosures. Complying with both schemes requires robust data collection and verification processes.

What is SECR regulation UK?

The UK government introduced the Streamlined Energy and Carbon Reporting (SECR) regulation in 2019 as part of The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. This regulation mandates all large UK companies to report their annual energy use and carbon emissions.

Specifically, SECR reporting applies to:

UK quoted companies
Large unquoted companies and large Limited Liability Partnerships (LLPs)

Organizations that meet at least two of the following criteria in a reporting year must comply with SECR:

Turnover: £36 million or more
Balance sheet total: £18 million or more
Number of employees: 250 or more

These organizations now need to disclose energy use and carbon emissions in their annual reports, helping improve transparency and spur climate action across UK industry.

The SECR framework aligns with the Greenhouse Gas Protocol and compels organizations to report Scope 1 and 2 emissions. Companies can voluntarily report Scope 3 emissions as well. This information allows stakeholders to understand an organization's carbon footprint and track its progress against sustainability goals.

In summary, the SECR regulation requires energy and carbon reporting by large UK enterprises to drive decarbonization through greater transparency. It builds on existing emissions regulations faced by organizations and utilizes globally recognized GHG accounting standards.

Calculating Carbon Emissions: The SECR Calculator and Beyond

Understanding carbon emissions is the first step for SMEs on the path to sustainability. SECR reporting requires calculating and disclosing Scope 1 and 2 emissions, with the option to report Scope 3. This section will guide SMEs through emissions calculations using the DEFRA SECR calculator and other tools.

Scope 1 and 2 Emissions: The Starting Point

Scope 1 covers direct emissions from owned or controlled sources like vehicles and facilities. Scope 2 accounts for indirect emissions from purchased electricity and heat.

To calculate Scope 1 and 2 emissions:

Gather data on energy use, business travel, waste, etc. from utility bills, mileage logs, and other records
Input this data into the DEFRA SECR calculator
The calculator will output tonnes of CO2e covering Scope 1 and 2
For more complex operations, use carbon accounting software like EcoHedge for automated tracking

With credible emissions data in hand, SMEs have the baseline to set reduction targets and track progress over time.

Scope 3 Emissions: To Report or Not to Report

Scope 3 emissions encompass all other indirect emissions across the value chain like:

Purchased goods and services
Transportation and distribution
Investments
Leased assets
Waste disposal

Reporting Scope 3 is optional under SECR but provides a more comprehensive view of emissions for stakeholders. Key considerations on whether to include Scope 3:

Effort required to collect Scope 3 data
Relevance to the company's climate impact
Stakeholder expectations and industry norms

Streamlined tracking solutions like [ecohedge](https://<a href=).com">EcoHedge Lifecycle can simplify Scope 3 accounting.

GHG Reporting Standards and SECR

While SECR has its own framework, aligning with established GHG standards like:

The Greenhouse Gas Protocol
ISO 14064
CDP

Brings credibility and consistency. Using compatible tools like EcoHedge allows SMEs to satisfy both SECR and leading GHG reporting needs.

Data Collection Strategies for SECR Reporting

Accurate carbon accounting relies on robust data collection across all scopes. Strategies include:

Centralizing data in systems like emissions management platforms
Assigning data collection responsibility across teams
Tracking energy, travel, procurement, and other climate-relevant data at regular intervals
Prioritizing high-impact emission sources for more rigorous monitoring

Automation through EcoHedge can simplify this process. With reliable data feeding into carbon calculations, SECR reports will reflect true emissions.

SECR reporting builds the foundations for ongoing climate action. An understanding of carbon footprints allows SMEs to set ambitious reduction goals and make progress toward net zero emissions.

Crafting the SECR Report: A Step-by-Step Guide

Detailing the process of creating an SECR report, this section will provide SMEs with a clear blueprint for compliance.

SECR Report Example: A Model for SMEs

Here is an example SECR report for an SME that can serve as a template:

Overview: 2-page executive summary of energy use, carbon emissions, and energy efficiency measures over the past year. Includes charts showing trends and performance against targets.
Methodology: Explains approach used to calculate energy and carbon footprint, including emissions factors and scope of assessment.
Historical Data: Tables showing energy use and carbon emissions data for the past 4 years (in tonnes CO2e). a breakdown by source (electricity, gas, transport, etc.)
Energy Efficiency Measures: An itemized list of energy efficiency initiatives implemented over the last year with expected savings. For example:
Upgraded warehouse lighting to LEDs, saving estimated 200 MWh per year
Installed solar panels on roof, generating 150 MWh per year
Implemented employee energy conservation program, saving ~5% per year
Targets: Defines science-based targets for reducing energy use and carbon emissions over the next 5 years. For example, reduce emissions 30% by 2025.

This covers the key components an SME would need to disclose within an SECR report. It demonstrates the level of detail required using easy-to-understand metrics and data presentation.

Energy Efficiency and Carbon Reduction Initiatives

Within the SECR report, companies should provide details on actions taken over the previous year to improve energy efficiency and reduce carbon emissions, such as:

Energy conservation measures - e.g., adjusting HVAC setpoints, installing LED lighting
Equipment upgrades - e.g., purchasing Energy Star certified appliances
Onsite renewable energy - e.g., installing solar PV or wind turbines
Supply chain changes - e.g., sourcing from low-carbon suppliers
Employee engagement campaigns - e.g., incentives for using public transport

For each initiative, describe the specific actions taken, quantify the expected energy/carbon reduction impact, and report on progress made. Use metrics like kWh savings, tonnes CO2e avoided, and investment costs or payback period.

Reporting these details demonstrates to stakeholders that your company takes decarbonization seriously and has a sound strategy. It also allows benchmarking progress against targets year-over-year.

SECR reporting has linkages to broader climate-related financial disclosures expected under frameworks like the Task Force on Climate-related Financial Disclosures (TCFD). Key connections include:

Governance: How climate change risks and decarbonization opportunities are managed.
Risk management: Identification, assessment, and mitigation of climate-related risks.
Metrics and targets: Disclosing Scope 1, 2, 3 emissions and science-based reduction targets.

By aligning SECR methodology and data with financial climate risk reporting, SMEs can take a more integrated, strategic approach. For example, setting enterprise emissions targets that help minimize regulatory, market, technology and physical risks.

SECR and TCFD disclosures combined provide a robust picture to investors and regulators on how seriously climate change is being addressed across the business.

Verification and Assurance of SECR Reports

To provide credibility, it is best practice for SMEs to have their SECR reports verified by an independent, accredited professional. This review assesses whether:

Methodologies adhere to GHG protocol scopes and accepted carbon accounting standards.
Data sources, management processes, and calculations are accurate.
Reporting is balanced, consistent, and any errors/omissions are corrected.

Having this independent assurance gives stakeholders confidence in the integrity of the disclosures. It also highlights areas needing improvement for more robust tracking and reporting.

Various consulting firms offer verification services, often combining SECR assurance with financial audit functions. Costs vary based on report complexity but are generally affordable for most SMEs given the importance. Verification is not legally required but adds to report legitimacy so should be budgeted for.

Advanced SECR Strategies for SMEs

Aligning sustainability initiatives with business strategy can enable small and medium-sized enterprises (SMEs) to maximize value from SECR reporting. This section explores ways that SMEs can leverage SECR compliance to drive strategic advantage.

Aligning SECR with a Transportation Decarbonization Plan

Transportation accounts for a significant portion of emissions for many SMEs. Developing a transportation decarbonization plan can help drive emission reductions while satisfying SECR requirements:

Conduct an assessment to understand transportation-related emissions and reduction opportunities. This provides the foundation for decarbonization planning.
Set science-based targets for reducing transportation emissions over time. Integrate these targets into the SECR report.
Evaluate switching fleet vehicles to electric. Calculate expected emission reductions and cost savings. Outline policies on EV charging.
Promote employee use of public transport and carpooling. Provide incentives that encourage sustainable commuting habits.
Partner with logistics providers focused on sustainable delivery methods. Require vendors to report transportation emissions.

Updating the transportation decarbonization plan each SECR cycle fosters continuous improvement on transportation emission reductions.

Making EV Charging Points Mandatory: SECR Implications

Government targets aim for all new cars/vans to be electric by 2030. With transport decarbonization mandates looming, SMEs can get ahead by making EV charging points mandatory:

Introduce policies requiring all new company cars and vans to be electric. Phase out petrol/diesel vehicles.
Install EV charging points at all company facilities. This makes adopting electric fleet vehicles more practical.
Provide designated parking for EVs with charging access. Make charging easily available for employees.
Report details on EV infrastructure and policies in the SECR report. Show stakeholders proactive transition planning.

Mandatory EV charging sets SMEs on a path to achieve government decarbonization expectations well ahead of 2030. SECR reports should reflect policies and progress made toward transportation emission reductions.

Utilizing Envizi's ESG Reporting Software for SECR

Leveraging purpose-built ESG reporting software can streamline SECR compliance for SMEs:

Envizi automates data collection and calculations for scope 1, 2, 3 emissions. This reduces effort required for accurate SECR reporting.
Customisable SECR report templates ensure alignment with latest SECR requirements. No need to build reports manually.
Cloud-based software minimizes IT requirements. Envizi integrates with existing systems to pull necessary emissions data.
Guidance resources help SMEs interpret SECR regulations. Make reporting more efficient even with limited internal expertise.

Choosing the right sustainability software platform alleviates major pain points in compiling effective SECR reports year after year.

PowerReport: Enhancing SECR with Digital Tools

Solutions like PowerReport simplify SECR reporting through digital automation:

Data connectors pull necessary energy and emissions information from source systems automatically. No manual data entry.
Calculation tools streamline analysis required for SECR. Embedded emission factors produce accurate carbon accounting.
Interactive dashboards centralize data for easy report building and visualization of sustainability KPIs.
Collaboration features enable securely sharing SECR data across the organization or with auditors.

Leveraging purpose-built digital tools for SECR reporting not only saves time and effort, but also enhances quality, accuracy, and stakeholder engagement.

Conclusion: Embracing SECR as an SME Growth Catalyst

Summarizing the key points of SECR reporting, this section will reinforce the value of SECR as a tool for business development and sustainability leadership.

Recap of SECR Reporting Requirements

The Streamlined Energy and Carbon Reporting (SECR) regulations require UK companies to report their UK energy use and carbon emissions in their annual reports. This applies to large companies as well as some small and medium-sized enterprises (SMEs). Specifically, SECR applies to:

UK quoted companies
Large unquoted companies (meeting at least two of the following criteria - £36m annual turnover, £18m balance sheet total, 250 employees)
Large limited liability partnerships (LLPs)
UK registered companies within large groups
SMEs within large groups, if they consume more than 40,000 kWh of energy in the UK per year

The key requirements under SECR include:

Reporting total global scope 1 and 2 emissions, as well as UK energy use (kWh)
Using an appropriate reporting methodology like the GHG Protocol
Providing an emissions intensity ratio comparing emissions to turnover
Including comparisons to previous years
Providing information enabling investors to assess efficiency initiatives

Adhering to SECR ensures SMEs meet important reporting standards for energy and carbon emissions. It signals their commitment to transparency and environmental responsibility.

The Strategic Value of SECR Compliance

Complying with mandatory SECR reporting provides important strategic advantages for SMEs beyond basic regulatory adherence. Key benefits include:

Reinforcing sustainability credentials - SECR reporting underscores an SME's sustainability commitments for investors and stakeholders. This can improve access to ESG-linked financing.

Benchmarking progress - Tracking emissions performance over time through SECR reports enables SMEs to benchmark progress and showcase decarbonization achievements.

Preparing for future regulations - Getting SECR reporting processes in place early will position SMEs for success as climate regulations expand.

Uncovering savings opportunities - Monitoring energy consumption and emissions can reveal savings potential through efficiency upgrades. SECR insights can inform cost-saving initiatives.

Enhancing reputation - Public SECR reporting allows SMEs to strengthen their reputation with customers and business partners as a leader on climate action.

Future-proofing competitiveness - Leading on sustainability today through efforts like SEC reporting helps SMEs get ahead and protect their long-term competitiveness.

Future-Proofing Your Business with SECR

With momentum building around climate action and ESG reporting globally, SECR is likely just the beginning of expanded emissions monitoring and disclosure regulations for companies of all sizes. By embracing SECR reporting now, SMEs take an important step towards future-proofing their business.

Ongoing SECR compliance ensures SMEs have the processes in place to adapt to changing local and EU-level environmental regulations. It positions them to meet stakeholder expectations around climate transparency and stay ahead of what will soon become industry norms. Rather than a burden, smart SMEs recognize SECR as an opportunity to demonstrate forward-thinking leadership.

SECR Reporting for SMEs

The Essentials of SECR Reporting for SMEs