Another ‘catchy’ acronym but what does it mean?
The financial year ending 31st March 2019 saw the final year of the CRC Energy Efficiency Scheme (CRC), which has been replaced by Streamlined Energy and Carbon Reporting (SECR).
SECR is a Government scheme which aims to further incentivise energy efficiency and reducing carbon emissions. Annual energy use must be included in the annual Director’s Report and be subject to the same external auditing as the company’s financial statement. SECR has an element of cross over with the initiatives encouraged by the Energy Saving Opportunity Scheme (ESOS). Like ESOS, SECR presents a compliance risk, UK Government are creating policy to encourage UK organisations to focus on the businesses case for investing in projects to reduce energy costs, carbon emissions. With £1 saved in energy equivalent to the financial impact of an additional £20 in sales, for most businesses, they believe that most businesses can benefit financially this investment and support the UK’s journey to a zero-carbon economy.
Qualifying companies are those quoted specifically by the scheme and ‘large’ organisations. The definition of a ‘large’ company is similar to that for ESOS. It is either UK quoted companies (MGHG) or UK companies which meet two of the three following criteria:
- More than 250 employees
- Annual turnover greater than £36m
- Annual balance sheet greater than £18m
It is likely that 11,900 companies will be impacted by these new reporting requirements.
Public sector organisations, some charities and companies that use less than 40,000 kWh per year will be exempt from SECR.
Although SECR shares a lot with its now extinct predecessor, CRC, the new scheme includes changes. In addition to gas and electricity consumption, emissions arising from fleet fuel, generator fuel and refrigerants will be included.
Companies also must report on energy efficiency actions taken over the past year – this is where ESOS comes in, as it can help identify energy efficiency opportunities. Any reduction in energy consumption comes straight off the bottom line, increasing your organisation’s profit margins – a healthy way to hit your financial targets.
Changes to the CCL (Climate Change Levy)
The CCL is a line you may have spotted on your energy bill – and with the expiry of CRC, it’s also facing a change. The Government are recouping the revenue lost to CRC by increasing CCL. The CCL is a percentage fee for electricity, gas and solid fuel use that is applied by your energy provider. It’s meant as an incentive to use renewable energy as much as possible. From April 2019, the CCL has dramatically increased by 45% for electricity and 67% for gas. This increase is another reason to keep a watchful eye on your energy consumption, which will become an increasingly expensive cost unless you act soon.
How can you prepare and respond?
Although the first report is not due until after 1st April 2020, we should be planning for it now.
Through good carbon and energy profiling, your reporting can be made with little organisational disruption.
You should also be prepared to show that you act on your carbon emissions, and make sure that the relevant parties in your organisation know what SECR is and what it entails. From 1st April this year, electricity generated from renewable sources or good quality CHP units are exempt from CCL, so seek out carbon-reducing opportunities as they will reduce your direct energy costs..
Preparing your response now will avoid disruption with your audits, rework and the potential reputational risk of having your accounts rejected by Companies House.
If you would like help to manage your SECR requirements, we can help. We can review and audit your information in advance of your statutory audits. We can also calculate accurate emissions for your company, and provide all requisite documentation for SECR compliance. Our team are also qualified and experienced in identifying energy saving opportunities and advising on the most appropriate intensity metric.