On 6th November the Secretary of State published the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. The regulations amend the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008, to require additional annual reporting on emissions, energy consumption and energy efficiency action by quoted companies, large unquoted companies and large LLPs
Further guidance on how to comply with the new obligations to disclose emissions, energy consumption and energy efficiency action in directors’ reports or energy and carbon reports as applicable is expected to be published by January 2019.
The SECR regulation will come into force on 1st April 2019 and will apply to any financial years beginning on or after 1st April 2019. Therefore, we do not expect to see the first SECR reports within Directors Reports to be produced until 2020.
Below is Beond’s summary of the SECR regulation which has now been approved;
The new SECR regulations are designed to reduce complexity in the energy and carbon reporting landscape as well as broaden the scope for reporting compliance. This will mean almost a tenfold increase in the number of companies required to comply with energy and carbon reporting legislation.
SECR will apply to approximately 11,900 companies and 230 LLPs. The Government is currently reviewing whether public sector bodies will be included in SECR
The key requirements for inclusion are:
There is an exemption to the SECR for unquoted companies if it is difficult to obtain some or all of the SECR information, or if the company directors believe disclosing the information would be “seriously prejudicial”. It is anticipated that the failure to disclose due to “seriously prejudicial” reasons would only be used in exceptional circumstances and may be questioned.
Companies falling within the scope of the SECR will be required to:
From feedback received by 155 business the Government recognised that the current complexity of reporting policies was a key driver for making reforms to its current tax and reporting regime. Consequently, SECR shows a clear policy intention to replace the reporting aspects of the CRC with a new mandatory reporting regime that broadly follows the existing regimes under the Energy Savings Opportunity Scheme (ESOS). SECR has also been designed to align with Climate Change Levy (CCL) and Mandatory Greenhouse Gas Reporting (GHG).
As a result, the below reporting requirements have been drafted;
As with CRC, SECR will be implemented through Directors’ Reports within annual company accounts rather than requiring additional filings with Companies House (or other regulators).
The Government argues mandatory reporting like this will drive behaviour change in UK businesses, by raising awareness internally of energy efficiency. Boosting transparency for investors will also increase their ability to hold firms to account.
The most significant impact SECR has on the energy industry is the inclusion of over 10,000 business who were not previously required to comply with energy and carbon reporting. This is roughly the number already in scope of the Energy Savings Opportunity Scheme (ESOS), although they will not have had requirement for public disclosure up to this point. This compares to the 1,200 currently reporting under Mandatory GHG Regulations and the 2,000 participants in the CRC (which also includes the public sector).
A secondary impact of the abolition of CRC and implementation of SECR is the change in taxation on energy contracts from April 2019. Because CRC taxation will no longer be charged the UK Government has already published increases in CCL costs with rates rising from 0.583p/kwh to 0.847p/kwh from April 2019. This is to ensure the Treasury is fiscally neutral after the elimination of CRC.
As data collection, emissions calculations and reporting implications will vary from business to business it is important to plan accordingly. To check whether your business may be required to produce SECR energy and carbon reports, or to understand how to meet the data collection requirement please contact Beond on 0208 634 7533 or email us at firstname.lastname@example.org.