SECR: Ticking a Box or Intelligent Business Management?
Obligation or opportunity? From September, companies bidding for public sector contracts worth £5m+ will have to have a carbon reduction plan in place to achieve net zero by 2050.
With this in mind, Advantage Utilities Founder and CEO, Andrew Grover, explores how this ties into Streamlined Energy and Carbon Reporting (SECR). Is it simply about ticking boxes or more about doing business in a better way; a way that’s good for your business, costs and importantly, the planet?
Emissions generated by business and industry, make a major contribution to UK greenhouse gas (GHG), which is why the government introduced SECR - a mandatory ‘carbon and energy’ reporting scheme. Initiated for large companies to encourage greater energy efficiency, it is designed to achieve year-on-year GHG reductions.
With thousands of UK companies having submitted their first SECR data in 2020, for many, the processes will now be in place making reporting easier going forward.
But, with the Climate Change Committee’s most recent Carbon Budget recommended pathway requiring a 78% reduction in UK territorial emissions between 1990 and 2035. In effect, bringing forward the UK’s previous 80% target by nearly 15 years, for those, not up to speed in-house, SECR isn’t going to go away.
Further indications of this include the recent government guidance stating that for all contracts with an anticipated value above £5m per year ex.VAT, government departments and non-departmental public bodies will have to “verify that the supplier remains committed to achieving net zero prior to entering into any contract awarded under a framework agreement.” This will be proven through the consideration of a Carbon Reduction Plan (CRP) submitted as part of a bid, making schemes like SECR even more relevant.
Who has to report on SECR?
SECR applies to quoted companies, which means companies listed on the London Stock Exchange (LSE), unquoted companies that are not listed on the LSE but that qualify as ‘large’ and ‘large’ Limited Liability Partnerships (LLPs).
A company is ‘large’ if it meets at least two of the following criteria within a reporting year:
250 or more employees
A balance sheet of, or greater than, £18 million
An annual turnover of, or greater than, £36 million
Companies that are incorporated outside the UK, including foreign parent companies of UK subsidiaries, are not required to comply.
Damage to the environment or damage to your business?
A SECR report must be included in a company’s Directors’ Report (or a new Energy and Carbon Report for large LLPs) and filed with Companies House. Companies that fail to comply with the new SECR requirements may have to resubmit their annual company accounts or pay fines if filing deadlines are missed. Failure to file Confirmation Statements or accounts is a criminal offence, which can result in directors being fined personally in the criminal courts.
Potentially more damaging is the fact that a business's reputation is at stake. Whereas with the Energy Savings Opportunity Scheme (ESOS), disclosures of energy usage and emissions are not made public, with SECR disclosures are public and feature as a new section in a business’ yearly, published accounts.
This means not only are a business’ finances transparent but also elements of its approach to sustainability.
Why is SECR good for UK business?
Environmental, social and governance (ESG) investing is predicted to grow rapidly in the next five years. According to research by PwC, ESG funds are expected to increase their European fund market share by between 15 per cent and 57 per cent. The trend will see trillions of pounds become available to fund ESG activities such as renewable energy projects, with investors looking for the best return on their investment.
What are the advantages of appointing an external SECR consultant?
For those within businesses who are responsible for managing SECR, it can be daunting in terms of data collection and sustainability data management. However, there is plenty of expertise available from external consultants to ensure the correct utilities and carbon data is gathered and that all emission scopes are reported on with the correct documentation submitted.
Whilst some may simply view the SECR process as a time-consuming and expensive overhead, forward-thinking businesses view it as an opportunity.
Letting a SECR consultant take control of your environmental reporting in a proactive way can reap multiple benefits. Let’s take a look at just some of the top-line opportunities.
Insight: Collect and analyse energy-use data
With energy being one of a business’ biggest overheads, accurately collecting energy data and monitoring, opens the door to a wealth of information.
Undertaking an energy audit for your business, the SECR consultant will identify how much energy is being used in total, and then analyse it by energy type and source, even down to when it is being consumed.
Determining the metrics a business is going to report against means a baseline can be set for reporting going forwards.
Then, they can advise on cost-saving, energy-efficient methods, funding options available and tactics to reduce your spend. Taking a closer look at energy consumption, for example, may offer many businesses a much-needed lifeline to reduce overheads while improving resilience and addressing climate change in the process.
Develop a data-driven strategy to manage energy usage
Looking at the data and insights across buildings and portfolios. Likewise, at a more granular level, even down to operational minutes and seconds provides an opportunity to identify usage behaviour across buildings and processes.
A SECR consultant can then help to develop an energy and carbon strategy for the business. A good one will challenge you to think about the future – what fits now, may not do so in the years to come. The business may have strong growth plans that will increase consumption, or ambitions to develop the site or services. These considerations should be factored in.
Identify energy saving and carbon emissions reduction opportunities
Assessing energy consumption in such detail will mean opportunities can be identified to reduce energy usage in key areas of a company such as an HVAC system or on a production line, which can make significant differences to annual usage.
All businesses will have explored their energy consumption in some way at some point in time, whether that’s looking for a better deal on bills or considering how to make their own energy onsite. For the latter, some will have found the cost prohibitive or the return on investment insufficient, while others will have made sizeable investments into low-carbon technologies such as combined heat and power several years ago, and now need to make upgrades.
With new options becoming available regularly, a specialist SECR energy consultant will advise on the latest renewables technology available as well as offering advice on aspects such as forthcoming industry regulations and financial support.
Potentially cost save across the business and its sites
Understanding energy data better, not only supports a company’s sustainability efforts by reducing consumption but will enable the identification of cost-saving opportunities too by looking at when is best to buy and assessing contract purchasing types, for example fixed, flexible, pass through purchasing, helping to procure and manage business utilities better.
On average, businesses will save between 20 and 30% on their energy bills by taking control of their energy.
In fact, it can provide an additional revenue stream. Businesses with technologies such as battery storage and combined heat and power may be able to provide greater flexibility for the UK energy grid in return for payment. This not only provides an additional source of revenue for the business but also has the potential to lower the cost of the grid for all users.
The future for SECR?
Introduced to make sustainability disclosure a normal way of business life, at Advantage Utilities we believe SECR is more than likely going to filter down to smaller organisations – and for the government to reach its targets it is almost imperative.
Either way, whilst SECR is obligatory for many businesses, if embedded into an organisation’s culture in a positive way, opens up the continual potential for commercial advantage as well as, most importantly, climate change.
To speak to one of our consultants to discuss SECR compliance please contact us.