The new rules: mandatory energy and carbon reporting
Paul Reeve outlines the new reporting requirements for emissions and energy use
Mandatory energy and carbon reporting rules that apply to many larger organisations have recently come into effect. From April 2019, streamlined energy and carbon reporting (SECR) requirements apply to companies and limited liability partnerships (LLPs) that meet two of the three conditions below:
- Annual turnover of £36m or more
- Balance sheet total assets of £18m or more
- 250 employees or more.
IEMA and its Climate Change Network were closely involved in the development of these new rules, achieving a longstanding IEMA objective of extending mandatory carbon reporting to some 11,000 large businesses.
What needs to be reported?
Businesses covered by the new rules must publish the following information annually:
- UK energy use (including that for the previous year, when making a second or subsequent report)
- The associated Scope 1 and Scope 2 greenhouse gas (GHG) emissions
- An emissions intensity ratio
- Methods used in the calculation of disclosures above
- A concise but relevant ‘narrative’ on energy efficiency action taken during the year.
The required narrative could include a wider range of actions, such as:
- Installing smart meters/energy monitoring
- Significantly moving vehicle fleet towards electric vehicles
- Capital investment programmes such as energy-efficient lighting
- Behavioural change programmes.
Companies may also refer to action following energy audit recommendations made under the Energy Savings Opportunity Scheme (ESOS) or the ISO 50001 energy management system standard.
Scope 1 and 2 GHG emissions
Scope 1 emissions are GHGs (usually, but not exclusively, CO2) released from sources owned or controlled by an organisation, expressed as CO2e (the CO2 equivalent of all GHG) emissions. Examples may be emissions from owned or leased vehicles, or site boilers or other combustion processes (‘direct emissions’).
Scope 2 emissions are GHGs released from the use of purchased electricity, heat and cooling. Although these CO2e emissions are linked to an organisation’s activities, they occur beyond its direct control (‘indirect emissions’).
When reporting, kWh data should be multiplied by the conversion factors shown in UK Greenhouse Gas (GHG) conversion factors for company reporting, here.
Energy aspects to be covered
As a minimum, reportable energy use should include electricity, gas and transport – notably road transport, including ‘grey fleet’ fuel that is reimbursed to employees via business mileage claims.
Annual reports will typically include metrics such as:
- Total kilowatt hours (kWh) of gas used
1b. CO2e emissions from gas use (in tonnes)
- Total kilowatt hours (kWh) of electricity used
2b. CO2e emissions from electricity use (in tonnes)
- Total litres of vehicle petrol and diesel, plus any LPG/CNG used
3b. CO2e emissions from use of road fuels (in tonnes)
- A ‘carbon intensity’ metric, relevant to the organisation’s industry sector (eg tonnes of CO2e per £1m revenue).
Mandatory data will support benchmarking
The new reporting requirements can largely be met via established voluntary reporting standards such as the GHG Protocol and ISO 14064-1, or schemes such as the Global Reporting Initiative (GRI). GRI Standards are a modular, interrelated set that may be used by organisations to report on sustainability impacts. They are available here.
However, mandatory reporting will put many more large organisations’ energy and carbon metrics into the public domain, allowing industry-wide benchmarking and even the compilation of ‘league tables’, which may drive overall performance improvements.
The SECR Environmental Reporting Guidelines provide more details on the new reporting rules, which apply for financial years running from (or after) 1 April 2019 and require the data to appear in the Directors’ Reports of accounts submitted to Companies House. The new mandatory rules apply to large unquoted companies and LLPs (quoted companies have slightly different energy and carbon reporting requirements) and there are various exemptions for organisations that use less than 40MWh of energy a year. Furthermore, rules relating to group reporting and subsidiaries may vary from any ESOS or Carbon Reduction Commitment requirements.
Paul Reeve CEnv FIEMA is director of CSR and communications at ECA, an engineering services trade body.