Businesses in scope of SECR have to use ‘at least one intensity ratio’ in their reporting. Simon Chiva, Head of Climate Action at Sustainable Energy First, explains what this means and how to go about it.
Intensity ratios aren’t new – they’ve been mentioned in the Streamlined Energy and Carbon Reporting (SECR) rules since they first came into force in 2019. But at Sustainable Energy First, we still get a lot of queries from businesses who are confused by this requirement.
What’s the point of intensity ratios?
As you’ll know if your business is in scope, the point of SECR is to get businesses reporting on their energy use and the carbon emissions associated with that. The point of an intensity ratio is to put the carbon figures in context. This is known as normalising your data and it’s important because it allows cleaner comparisons.
- See how your business is progressing on its climate goals and efficiency targets year on year
- Compare with other businesses in the same sector
- Assess how the energy and carbon footprint varies across different parts of the business
- Put carbon emissions in the context of business growth and changes in productivity
I’ll give an example to illustrate that last one. If you’re a manufacturer that has increased output in the past year, your energy and carbon footprint has probably increased along with that. Without an intensity ratio, the absolute figures will make it look as if you’ve made no progress in energy efficiency or your climate goals. Maybe it even looks as if you’ve gone backwards. But when the data is normalised and put into the context of your big boost in productivity, it might show that the emissions per unit of output have gone down a bit. You can see and show that you’re on the right track.
Calculating an intensity ratio
The formula for calculating an intensity ratio is simple on the face of it:
- Take your annual emissions in tonnes of carbon dioxide equivalent (CO2e)
- Divide by an appropriate metric
The tough bit is finding the right metric, or metrics, for your business. There are various options, including:
- Financial metrics, like turnover or profits
- Number of employees
- Productivity metrics, like the number of products made or sold
- Floor space
That’s far from an exhaustive list. A coffee shop chain might choose tonnes of CO2e per million hot drinks made, while a retailer might go for emissions divided by the number of customers served in a year.
How many intensity ratios do you need?
The SECR rules say that you need to include at least one intensity ratio, but we would recommend opting for more. The official guidance says that if your organisation does a number of different things, it makes sense to have separate ratios. For example, if you’re a travel company that owns both planes and hotels, have one intensity ratio for the planes and one for the hotels.
Intensity ratios don’t just have to be about greenhouse gas emissions. They can also be about other aspects of your company’s impact on the environment. For example, two commonly used metrics are water consumption and tonnes of waste.
The key is to be able to track and report your progress as simply and clearly as possible. Your SECR reporting should include how you calculated your intensity ratios, and this methodology shouldn’t change from year to year. This isn’t just for the benefit of your compliance obligations, or even for your stakeholders. It’s also useful data that you can use to shape future ESG and business strategy.
For expert guidance on choosing and calculating the right intensity ratios for your business, get in touch with the experts Sustainable Energy First.
