Energy and carbon reporting demands on large unquoted companies

21 May 2019

The introduction of these Regulations extends the reporting of carbon emissions to private companies and is a very welcome step in the journey towards helping corporates to be more cognisant of their energy usage. Combined with the Energy Savings Opportunity Scheme Regulations, which requires companies to identify opportunities for reducing energy consumption, it encourages companies to reduce energy costs and therefore contribute to ongoing efforts to reduce global warming. These regulations will be a great benefit to both companies and society.

The new Carbon and Energy Reporting Requirements, impose:

  • new reporting obligations as to what must be included in the Directors’ Report for large unquoted companies;
  • a new obligation on large LLPs to prepare a new kind of report (“the Energy and Carbon Report”); and
  • additional reporting obligations for quoted companies to be included in the Directors’ report.

The purpose of the new Streamlined Energy and Carbon Reporting (SECR) framework is to simplify carbon and energy reporting requirements for companies and ensure that they have the information they need to act to reduce emissions and energy costs.

The SECR framework, which will be implemented via the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (the 2018 Regulations), will build on these existing reporting obligations rather than replace them and are intended to encourage the implementation of energy efficiency measures, which have economic and environmental benefits, supporting companies to cut costs and improve productivity at the same time as reducing carbon emissions.

When are they effective?

Financial periods beginning on or after 1 April 2019.

Who will the new rules apply to?

  • Quoted companies (unless exempt);
  • UK unquoted companies and LLPs that qualify as a large entity (unless exempt);
  • UK unquoted parent companies or LLPs of groups headed by them that qualify as a large group (unless exempt).

Definition of a large company / group

Whether an entity or parent entity must comply with the energy and carbon reporting requirements depends on the size of the entity or group in its first year. An entity is a large entity if it meets two or more of the following:

  • Over 250 employees.
  • Turnover more than £36m.
  • Balance sheet more than £18m.

A group is a large group if it meets two or more of the following:

  • Over 250 employees.
  • Turnover more than £36m net (or £43.2m gross).
  • Balance sheet more than £18m net (or £21.6m gross).

In subsequent years there are additional qualifying conditions that need to be considered.

Certain entities are exempt from the reporting obligations including:

  • companies which are low energy consumers (40,000 kWh of energy or less over the period for which the directors report is prepared) and state in their report that this the reason that the information has not been disclosed;
  • UK subsidiaries covered by their parent company’s group report;
  • where it is impractical for a company to obtain some or all of its global energy use information (subject to statement and justification of the exclusion); and
  • where publicly reporting on energy usage is considered by the directors to be seriously prejudicial to a company’s interests (again, subject to the disclosure thereof).

What are the requirements for large unquoted companies and large LLPs?

Large unquoted companies and LLPs will need to report in the Directors’ Report and Energy and Carbon Report respectively:

  • UK energy consumed and associated greenhouse gas emissions;
  • at least one intensity ratio expressing the emissions in relation to an appropriate quantifiable factor e.g. greenhouse gas emitted per employee;
  • comparative figures for energy use and GHG emissions (except in the first year);
  • methodologies used in calculation of disclosures; and
  • a description of any principal measures taken to increase energy efficiency during the financial year.

UK energy consumed

Entities must disclose a figure, in kWh of the annual quantity of energy consumed from:

  • activities involving the combustion of gas for which they are responsible;
  • activities involving the consumption of fuel for the purposes of transport for which they responsible; and
  • the purchase of electricity for the company’s own use including for the purposes of transport.

Energy consumed for the purposes of transport means energy used by a road going vehicle, a vessel, an aircraft or a train during any journey which starts, ends or both within the UK. The calculation should include total energy consumed from onsite transport, fuel used on business use activities involving company cars/fleet cars, personal/hire cars, private jets, fleet aircrafts, trains, ships and company operated drilling platforms.

The calculation should exclude (but may be reported separately), fuel associated with train, flights or taxi travel taken by employees where the company does not operate the transport and fuel associated with the transportation of goods where the company subcontracts another party to undertake the work.

Associated greenhouse gases

Entities must state the annual quantity of emissions (in tonnes of the carbon dioxide equivalent (CO2e)) resulting from the total UK energy use from electricity, gas and transport as defined above. In order to report these emissions, the ‘activity data’ such as distance travelled, litres of fuel used or tonnes of waste disposed must be converted into carbon emissions. The Government conversion factors provide conversion factor spreadsheets which incorporate the values that should be used for conversions and provide step by step guidance on how to use the factors.

Intensity ratio

Intensity ratios compare emissions data with an appropriate business metric or financial indicator, such as sales revenue or square metres of floor space that allows comparison of energy efficiency performance over time and often with other similar types of organisations.

Whilst the legislation does not dictate which intensity measure to use it the most relevant ratio for the business activity should be disclosed and calculated on a consistent basis year on year with the method of calculation disclosed.

HM Government has updated its guidance “Environmental Reporting Guidelines including streamlined energy and carbon reporting guidance” which includes examples of common intensity ratios set out in Annex F


The legislation does not prescribe the methodology to be used to calculate the required information. For credibility purposes, it is important that robust and accepted methods are used. The HM Government guide recommends that a widely recognized independent standard is used such as:

  • GHG Reporting Protocol - Corporate Standard;
  • International Organisation for Standardization, ISO (ISO 14064-1:2018);
  • Climate Disclosure Standards Board (CDSB); and
  • The Global Reporting Initiative Sustainability Reporting Guidelines.

What are the additional requirements for quoted companies?

The new energy and carbon report legislation now requires quoted companies to report additionally in their Directors’ Report on:

  • the global energy use and greenhouse gas emissions, including comparatives (except in the first year);
  • the quantity of energy consumed, including the proportion relating to the UK and offshore area; and
  • a description of any principal measures taken to increase energy efficiency during the financial year.

The global energy use data must be calculated in kWh. Where information has been converted to kWh from other units e.g. transport information collected in litres of fuel this should be covered in the methodology.


Participation in schemes, such as the CRC Energy Efficiency Scheme (CRC), Energy Savings Opportunity Scheme (ESOS), Climate Change Agreements (CCA) Scheme, EU Emissions Trading System (ETS) or MGHG reporting and voluntary environmental reporting frameworks may mean that much of the information required to comply with the new disclosure requirements will be readily available. However, those that have not historically participated in such schemes will need to look carefully at what information is needed and whether their current systems are capable of providing it.

HM Government has updated its guidance “Environmental Reporting Guidelines including streamlined energy and carbon reporting guidance” to help companies identify whether additions or changes to existing systems or processes will be necessary. Early identification will ensure that any necessary changes can be made in time to ensure that the new SECR obligations are met.

How RSM can help?

RSM has over 10 years of experience assisting organisations with carbon accounting and reporting including:

  • audits of carbon management;
  • preparations of reports and evidence packs under the CRC Energy Efficiency Scheme;
  • preparing sustainability reports; and
  • undertaking ESOS assessments and energy audits.

RSM’s Governance and Risk department can support you prepare your energy reporting submissions as part of the Director’s report.

For further information, please speak to Danielle Stewart.

Danielle Stewart
Danielle Stewart OBE
Partner, Head of financial accounting advisory specialists
Danielle Stewart
Danielle Stewart OBE
Partner, Head of financial accounting advisory specialists