SECR reporting: is your business making any of these 5 common mistakes?
For many businesses, the deadline for their first report under the Streamlined Energy and Carbon Reporting (SECR) regulations is just weeks away. If your business has never done any energy or carbon reporting before, compiling your first SECR report can be a confusing task. We’ve identified five common mistakes; time to double-check that you haven’t made any of them!
1. Not having a clear organisational boundary
When you are gathering data under SECR, it is essential to set an organisational boundary. That is, you need to clearly state which of the operations and sites connected with your business count as part of it. If your company structure is relatively simple and you own all the assets that you operate, defining your boundary for reporting purposes will probably be straightforward. However, more complex business structures will have to choose whether to base their boundary on financial control, operational control or equity share. It may be worth getting specialist advice on the best approach for your business. However you choose to define your organisational boundary, it is absolutely key that you apply it consistently.
2. Leaving out overseas emissions
If your company is publicly listed, SECR requires you to disclose all the annual greenhouse gas emissions for which your company is responsible. Many people do not realise that this includes emissions from overseas operations as well as those in the UK. It is important to have systems in place for gathering the data on your overseas emissions and including it in your SECR reporting.
Different rules apply for large LLPs and large companies that are not publicly listed. They just have to report on their UK energy use and associated emissions.
3. Not choosing the best intensity ratio
The idea behind the emissions intensity ratio (EIR) is to place emissions in the context of overall activity by calculating the ratio between the two. For example, the UK government measures its own EIR by calculating how many tonnes of greenhouse gases are emitted for every unit of GDP. To comply with SECR, businesses must include at least one EIR in their report, but they have a choice about which activity metric to use and could choose to use more than one.
Many businesses use turnover as the metric for their EIR, and there is nothing wrong with that, but there may be other activity metrics that are more meaningful for your business, or easier for readers of your SECR report to visualise. For example, a tractor manufacturer could choose emissions per tractor, or a brewery could choose emissions per gallon of beer.
4. Getting conversion factors wrong
Despite the name, SECR doesn’t just require you to report on your carbon emissions. The Kyoto Protocol covers seven main greenhouse gases and six of these are compulsory to report under SECR. Unfortunately, rather than just recording your emissions of each different gas in tonnes or kilogrammes, you must record them in terms of their global warming potential. This means using a conversion factor to express them in terms of carbon dioxide equivalent, or CO2e.
This is an area where it is easy to make mistakes, such as forgetting to do the conversion or using the wrong conversion factor. This can make your calculations wildly inaccurate; for example, a tonne of nitrous oxide has a global warming impact equivalent to 298 tonnes of CO2, so if you reported your nitrous oxide emissions in terms of kg or tonnes rather than CO2e, your calculations could be wrong by a factor of nearly 300. Getting your first SECR report externally verified by an expert will give you peace of mind that you haven’t made any big mistakes like this.
5. Ignoring value chain emissions
The SECR regulations only require you to report Scope 1 (direct) emissons and Scope 2 emissions (those from the energy that your business buys from suppliers). With one minor exception, there is currently no obligation for most companies to report their Scope 3 emissions, or those from their value chain. It is very tempting for companies grappling with their first ever SECR report to breathe a sigh of relief about this and do the legal minimum, but ignoring Scope 3 would be a mistake.
Value chain emissions usually make up the highest proportion of a company’s emissions, which means you can’t take any meaningful action on your carbon footprint unless you start getting to grips with emissions in this area. It is also likely that in the future, Scope 3 reporting will become compulsory, so setting up systems to gather that data now will mean you’re not taken by surprise in future. Our FAQ on Scope 3 emissions explains in more detail why it’s important not to ignore them.