Ask the experts: Streamlined Energy and Carbon Reporting
Many businesses are compiling their energy and carbon information for the first time under SECR, the Streamlined Energy and Carbon Reporting regulations. We caught up with the compliance experts at BiU to find out how businesses are coping with the new requirements.
Advising on regulatory compliance is a big part of your job. What do you think is the most difficult aspect of compliance for UK businesses?
The compliance landscape is complicated, and it’s our job to help businesses navigate it successfully. There are over 11,000 businesses that have to comply with SECR, and many of them have never done an energy and carbon emissions report, never measured their own carbon footprint. [SECR applies to financial years which began on or after 1st April 2019, so many businesses are now compiling their first ever SECR reports.] It’s daunting because this is all new for them.
SECR actually presents a great opportunity for smaller businesses, not just the big quoted companies, to start calculating and managing their energy use and carbon footprint. That information is critical in so many ways, not just for ticking a compliance box. It’s really important that we highlight the opportunities, and not just the risk.
What’s your advice for a business that doesn’t know where to start with SECR?
Businesses new to carbon reporting may not have a clear map of which areas and activities of their business consume energy and therefore generate emissions. So to start with, before you gather any data, you need to develop an inventory of your sites and your emission sources. The risk of skipping that step is incomplete reporting.
We would recommend starting early and doing that mapping exercise, so you have a clear view of your portfolio and all the energy sources that you need to include. We always start by doing this with any new client, whether it’s for SECR purposes or any other kind of greenhouse gas reporting. Only then can you move on to the next stage.
What is your advice for the data-gathering stage?
Once you’ve done your mapping exercise, you need to start allocating responsibilities internally for gathering the data on each emissions source. So for example, the fleet manager could be responsible for gathering data on vehicle fuel use, and so on. That helps with consistency, because you always know who’s responsible for collecting what, by when, and what format it is coming in.
This is a real opportunity to make life easier for yourself in the future. If anyone asks for detailed information on what you’re emitting as a business – a client, a journalist, an investor, any other stakeholder – you’ve got it to hand. It’s also futureproofing your business against the highly likely possibility that regulations will tighten and require more information.
If you’re new to carbon and energy reporting, how long will it take to get SECR-ready?
We’d recommend starting to prepare at least six months before the end of the financial year. You need that time to do the mapping and data-gathering – particularly as the data may not be readily available. Our team works with clients to identify gaps in their data and help to fill them, so that by the time the report is due they can be confident that everything in there is complete and accurate. The more complex the business structure, the more time you need, especially for the mapping phase.
Within a company, who tends to take overall responsibility for SECR compliance and which roles are best suited to this?
The role of the person wearing the SECR cap varies. Many businesses have a dedicated energy or sustainability manager, but more commonly with SECR it could be someone from the finance department. Or they could work in building operations, or perhaps be a site manager. It could even be a health & safety officer.
So the SECR person could have any job title, but the key thing is to share information within the business so everyone can do the best possible job. We’ve come across situations where someone is given responsibility for a company’s carbon reduction strategy, but they have nothing to do with compliance, so they’ve never seen the company’s ESOS (Energy Savings Opportunity Scheme) recommendations and they’re not involved with SECR. That’s a real missed opportunity, and our job in that situation is to highlight the potential crossovers and benefits.
It’s another common issue that a report gets signed off by a director but the information within it doesn’t get used to its full potential. The information you gather to meet your ESOS and SECR responsibilities is really valuable in highlighting areas of high energy use and emissions as well as ways in which reductions can be achieved. We recommend that you think about tailoring your reporting to different areas of the business, or different sites – whatever is meaningful and relevant to your particular business – so you can get the full benefit of that great data you’ve gathered and it can help drive awareness and engage your employees on the energy and carbon agenda as well!
What are the most common errors you come across when working with businesses on SECR?
Data gaps are a common problem. We work with companies to help them understand how to fill those gaps appropriately, through the best estimation techniques.
It’s also easy to make mistakes when transposing your data into the output required by an emissions report, especially because it’s a completely new challenge for many businesses. For example, maybe you’re trying to convert your LPG use into the quantity of greenhouse gases emitted, but you multiply it by the wrong conversion factor – maybe the conversion factor for coal or diesel – and get completely the wrong answer. Converting transport emissions into kilowatt hours is another area where it’s really easy to make a mistake.
How can businesses avoid the most common SECR mistakes?
If you’re making the emissions report in-house, it’s really important to get it externally verified by an expert.
They will thoroughly review the data with a fine tooth comb and should feed back in a way that helps you improve your reporting moving forward. This can be really helpful for a person who’s taken on the daunting responsibility of emissions reporting!
One specific area that’s easy to get very wrong is the reporting of refrigerant gases. We’ve seen many situations where if it’s wrong, it’s really wrong, because the global warming potential is so great. If you’re not collecting the right information from your F-Gas registers, or if you’re applying the wrong conversion factors, the significance of the error can be huge.
Do many businesses do more than the minimum required by SECR?
Some will always see it as a tick-box exercise and just do the minimum, but many want to use SECR as an opportunity and go beyond that. What we see most often is where a business has significant Scope 3 emissions, perhaps if they procure a lot of third-party logistics, they will often be keen to discuss and include those emissions, despite only being required to report on Scope 1 and Scope 2. This is important so that they get the full picture of the emissions sources connected with their business. Some of it is about reputational risk, both within their industry and more widely. You don’t want to fall short of what your competitors are doing. If you do the initial mapping exercise properly, it helps you make an informed decision on what’s worth including outside of the mandatory emissions sources.
Will SECR encourage companies to reduce emissions?
Yes, without a doubt. From an energy and carbon perspective, you can’t manage what you can’t measure. If a business doesn’t have a clear inventory of its emissions and associated costs, there’s not much incentive to do anything about it. SECR gives you that awareness. Also, the information is in the public domain and if your emissions keep going up, it’s not going to look good. Your SECR data can be a great starting point for a robust carbon reduction strategy.
How do you think energy and carbon regulations will change in the future?
The requirements are likely to tighten as time goes on. SECR has different requirements for large unquoted companies as opposed to quoted companies. For example, unquoted companies don’t necessarily need to use the GHG Protocol, the international standard for greenhouse gas accounting, you can use any methodology you like. We suspect that will change so that all businesses are required to use the GHG Protocol.
The UK is moving towards a target of net zero emissions by 2050, and we can’t claim to be succeeding in that if companies ignore their Scope 3 emissions, let alone if we ignore the global emissions that are a direct result of UK activity. So we will probably see more comprehensive data-gathering and reporting and that will happen quite quickly. Hopefully with that will come a greater awareness of the action required to reduce not only Scope 1 and 2 but also Scope 3 emissions.
How can businesses prepare for changing regulations?
Many businesses are signing up for science-based targets, and that’s a really good step. It means you get everything you need for a SECR report, but also gather more data and have higher standards around collecting, processing and managing emissions. It’s a good way to future-proof your business and start moving towards your own net zero target. There are several valid routes to net zero, but science-based targets make it quite accessible so it’s easier to start taking action now.
Ultimately, it all comes down to awareness. We all – businesses and people – do things without thinking about it. But when you see the consequences of your actions, that’s a great driver to start taking action to generate change. When businesses start to do the work of identifying their own emissions hotspots, they will see the opportunities to reduce carbon and cut energy costs too. SECR is going to be a really good and positive driver for improving climate consciousness and bringing about useful change.